October 4, 2006

 

US Wheat Outlook on Wednesday: Firmer, hoping for export business

 

 

U.S. wheat futures are expected to start Wednesday's day session firmer on hopes of attracting some Egyptian wheat business and on firmer overnight trade.

 

Benchmark Chicago Board of Trade December wheat is called to open 2-3 cents per bushel firmer.

 

In e-cbot overnight trade, December wheat was 3 cents firmer at US$4.42 1/2.

 

Egypt's state-owned General Authority For Supply Commodities issued a buy tender late Tuesday for 55,000-60,000 metric tonnes of wheat for shipment Nov. 1-10. Among the wheat Egypt seeks is U.S. wheat, among other origins. Bids were due early Wednesday.

 

After the recent price rally on concerns of global wheat supplies due to droughts in Australia and production problems elsewhere, analysts said previously to sustain the price rally, demand must be uncovered.

 

"I think wheat will be higher as we hope to get some of this Egyptian business," said one long-time floor analyst. "Although we only sold about 200,000 tonnes of wheat to Iraq yesterday, which was disappointing, we hope they're going to be back for more."

 

Several analysts said rumors are that Iraq might eventually buy up to 500,000 tonnes of U.S. wheat, but so far it's just been speculation.

 

A technical analyst said while bullish traders remain in control of the CBOT wheat market, they need to extend prices to keep the rally going. The analyst said this week's high of US$4.58 is strong overhead resistance, with the next upside price objective is a close above that level. For the bears, there are seeking a close under US$4.25. First resistance is seen at US$4.47 and then at US$4.50. First support lies at US$4.36 and then at US$4.30.

 

Given the market's rebound overnight, the floor analyst said it's possible Tuesday's break was just a technical price correction.

 

Rains continue in the dry areas of Argentina. DTN Meteorologix said in Argentina, widespread rain and thunderstorms are forecast for Wednesday, but the weather will turn drier. The firm said recent and forecast rains improve the condition of winter wheat, but they add "some local flooding can't be ruled out in northern wheat areas."

 

"It is still raining in Argentina, but I think we've priced that in with Tuesday's break," he said. "Plus it's still dry in Australia."

 

In Australia, Meteorologix continues to show a chance for thundershowers in northern New South Wales and southern Queensland on Oct. 9 and 10.

 

DTN Meteorologix noted the Southern Plains appears to be drier than normal during the five to seven day period. They note in the long-range outlooks a slight chance for some moisture, especially in the dry southern regions.

 

Looking ahead, Thursday Statistics Canada is scheduled to release its monthly crop production estimate. It's likely Canada's wheat production will grow, with trade estimates ranging from 25.5 million to 27.0 million. Those forecasts are about 100,000 to 200,000 tonnes above StatsCan's earlier estimate of 25.925 million. Canada grew 26.775 million metric tonnes of wheat in 2005.

 

Argentine wheat stocks as of Aug. 31 were 3,960,990 metric tonnes, down slightly from last month's figure of 4,561,546 tonnes, but up from last August's data of 2,848,098 tonnes

 

In other news, Ukraine winter wheat plantings to date are 4.588 million hectares, or 77% of the planned total area for the 2007 harvest as of Monday.

 

Euronext.liffe French milling wheat options set record highs for volume and open interest Tuesday, exchange officials reported Wednesday.