September 29, 2006

 

US Wheat Outlook on Friday: Flat to up 1 cent after USDA data

 

 

Traders and analysts expect U.S. wheat futures to open steady to 1 cent firmer on what is considered a slightly bearish crop report from the U.S. Department of Agriculture that raised 2006-07 production and also pegged quarterly stocks a bit higher than expected, sources said Friday.

 

Steady to firm calls in corn and higher calls in soybeans are expected to provide spillover support in wheat.

 

But market-watchers are aware of the technical momentum that might still be in the market from Thursday's climb to four-month highs in Chicago, which could affect prices.

 

The USDA raised its all-wheat production estimate for 2006-07 to 1.812 billion bushels, from 1.801 billion in August and higher than the average trade estimate of 1.792 billion.

 

Compared to the USDA's August data, winter wheat production was raised by 15 million bushels to 1.298 billion; spring wheat was lowered by 4 million bushels to 460 million; and durum wheat fell slightly by 1 million bushels to 54 million.

 

All-wheat production is still down 14% from last year, however, because of drought conditions over the southern and northern Plains this year. Winter wheat production is down 13% from last year, other spring wheat is 9% lower and durum fell 47%.

 

Adding to the bearish tilt of the report, wheat stocks as of Sept. 1 were higher than anticipated at 1.743 billion bushels, versus expectations of 1.711 billion. Stocks were down significantly, however, from the September 2005 level of 1.923 billion.

 

"The market's terribly overbought, but we've got a technical versus a fundamental opening here. We could have follow-through fund buying or because the report is a bit disappointing you could see profit-taking," said John Kleist, analyst at Top Third Ag Marketing in Chicago.

 

"So there's our conundrum," he added.

 

In other news, Australia's AWB Ltd. staff could be charged with terrorism-related offenses on e-mail evidence that shows the company knew million of dollars funneled to Saddam Hussein's regime could be used against Iraqis. AWB staff reportedly knew that US$222 million in bribes paid to the former Iraqi government through the U.N. Oil for Food program could have funded atrocities, an investigator said.

 

E.U. 2006-07 soft wheat production is estimated at 109 million metric tonnes, down 5.5% from last season, the E.U.'s organization of grain traders, the Comite du Commerce des Cereales, said Friday. July heat followed by rains during the harvest cut significantly into yields.

 

India, meanwhile, has no plans to extend the deadline for duty-free wheat imports by private companies beyond the current deadline of Dec. 31, the agriculture minister said Friday. Sufficient quantities of wheat are expected to arrive by December, so there is no need to extend the deadline.

 

The Canadian Wheat Board raised its price outlooks for wheat, durum and barley for the 2006-07 crop year, citing production difficulties in Australia and tightening U.S. and Black Sea supplies.

 

CWB Pool Return Outlooks for wheat ranged from CUS$20 per tonne higher to CUS$5 lower, versus August estimates. The durum PRO ranged from CUS$4 to CUS$20 per tonne higher.

 

Traders continue to keep a close eye on the weather forecasts for Australia and Argentina.

 

In Argentina, significant rains are in the forecast for next week, which should improve wheat conditions and replenish soil moisture, DTN Meteorlogix said. The best chance of rain is over central and eastern areas, but rains are possible also in the west and south.

 

In Australia, scattered showers with 0.10-0.50 inch were seen this week over northeastern New South Wales and southeastern Queensland. Any showers over the next seven days will be mainly confined to Western Australia and Victoria, but rain is needed in all areas to prevent further yield declines, Meteorlogix said.