September 27, 2006

 

US Wheat Outlook on Wednesday: Up 2-4 cents on follow-through, export hopes

 

 

Traders and analysts expect U.S. wheat futures to open 2 cents to 4 cents a bushel higher on follow-through buying from Tuesday's rally and on anticipation of fresh export business with Iraq, sources said Wednesday.

 

In e-cbot trade basis December contracts, Chicago Board of Trade wheat rose 4 cents to US$4.27, Kansas City Board of Trade wheat rose 4 1/4 cents to US$4.83 3/4 and Minneapolis Grain Exchange wheat was up 3 1/2 2 cents to US$4.65.

 

Anticipation that the U.S. will acquire fresh export business from Iraq and shrinking world supplies are providing bullish momentum for this rally, sources said.

 

"The strength is really carried over on enthusiasm for that Iraqi business...and anticipation of more export business to follow," said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.

 

Iraqi officials were in Kansas City on Tuesday, where they said they wanted to buy U.S. wheat but gave no details on how much or when they might purchase the wheat.

 

In addition, Friday brings the U.S. Department of Agriculture's quarterly Grain Stocks and Small Grains reports, which many traders are expecting to be a bit friendly for the market, Roose said.

 

A Dow Jones Newswires survey showed all-wheat production at an average 1.792 billion bushels, compared to the USDA's August production estimate of 1.801 billion bushels and 2005 production of 2.105 billion bushels.

 

Wheat stocks as of Sept. 1 were pegged at an average 1.711 billion bushels, compared to 1.923 billion as of Sept. 1, 2005.

 

Traders are keeping their eyes on weather forecasts for Argentina and Australia, where mostly dry conditions along with chances for light showers are expected to keep support beneath the market, a trader said.

 

"It looks like we have better chances for rain in Argentina, and I think the trade is looking at world supplies continuing to contract, so the market has a hard time breaking," said Roose.

 

A few thundershowers may be seen in southwestern Argentina this weekend and scattered thundershowers are possible in the north early next week, DTN Meteorlogix said, which should help improve conditions there.

 

In Argentina, mostly dry conditions with the possibility of light showers exist Wednesday and Thursday. Light showers are also possible Friday through Sunday, though conditions are expected to be mostly dry, Meteorlogix said.

 

Australia's northern New South Wales saw showers with up to 0.60 inch of rain Tuesday, and these rains may shift northward into southeastern Queensland Wednesday night and into Thursday.

 

Mostly dry conditions are expected in Western and South Australia and southern New South Wales on Thursday and Friday, with scattered showers possible in the far southeastern areas of NSW. Mostly dry conditions are also forecast for northern NSW and southern Queensland, with a few scattered showers possible in far eastern areas of these regions, Meteorlogix said.

 

In news, India's Sept. 1 wheat stocks are pegged at 6.72 million metric tonnes, down 42.2% from 11.62 million tonnes at the same time last year. Stocks have declined mostly because the government's wheat purchases from farmers declined sharply this year.

 

Ukraine exported 3.8 million tonnes of grain to Sept. 25, versus 4.82 million tonnes at the same time last year. Of the total in 2006, 1.21 million tonnes were milling wheat, 445,600 tonnes were feed wheat and 2.19 million tonnes were feed barley.

 

Routine export business had South Korea buying 23,000 tonnes of U.S. wheat for shipment between Nov. 20 to Dec. 20.