October 4, 2007

 

US Wheat Outlook on Thursday: 10-15 cents higher on overnight, exports

 

 

U.S. wheat futures are expected to start Thursday's day session 10-15 cents per bushel higher on vigorous export business and firmer overnight trade, analysts said.

 

In e-cbot overnight trading, Chicago Board of Trade December wheat rose 14 cents to US$9.41.

 

The U.S. Department of Agriculture said weekly export sales for the week ended Sept. 27 were 1.6 million metric tonnes, within trade expectations of 1.2 to 1.9 million tonnes. The export sales were 6% above the previous week and 10% above the prior four-week average, according to the USDA.

 

The trade already knew about a good portion of the export business, but the sales are still seen as supportive amid high prices, analysts said. Big buyers included Algeria, which took 584,500 tonnes; Mexico, which bought 190,900 tonnes; and Nigeria, which bought 110,000 tonnes.

 

"Export sales are solid," a CBOT floor broker said. "Demand is still strong."

 

In related news, Japan said it bought 160,000 tonnes of wheat, including 120,000 tonnes from the U.S., in a routine tender concluded Thursday. The other 40,000 tonnes were from Canada.

 

Statistics Canada estimated all-wheat production at 20.6 million tonnes, up from its previous forecast of 20.3 million tonnes. Trade estimates had pegged the crop at 18.40 million to 21.00 million tonnes.

 

The modest increase was seen as neutral for U.S. wheat futures because the size of the crop had already been ratcheted down a good amount due to hot, dry weather, a CBOT floor broker said.

 

The trade also continues to focus on dryness in Australia. There are rumblings about the possibility the wheat crop down under will be below 12 million tonnes, CBOT floor traders say.

 

Australia's drought is as bad as any in recorded history and worsened in September, ruining many winter crops including wheat, the government's Bureau of Meteorology reported Thursday. Averaged over the Murray-Darling Basin, or MDB, which includes much of eastern Australia's wheat lands, "it was the driest September in the historical record back to 1900," the bureau said.

 

Even if heavy rains started to fall in growing areas, it would be too late to lift production, according to a new USDA attach¨¦ report. The report pegged Australian wheat production at 16.25 million tonnes, down 4.85 million tonnes from the attach¨¦'s previous forecast.

 

Low stocks, low production and solid domestic demand are combining to make an "extremely difficult outlook" for exports in 007-08, the report said. Forecast wheat exports for 2007/08 have been revised downward significantly to 9.5 million tonnes, it said.

 

Although rains may not be able to help Australia's wheat recover from dryness, moisture could stabilize the crop, an analyst said. There looks to be a chance for showers in the West Australia wheat belt early next Week, according to DTN Meteorlogix.

In the U.S. central and southern Plains, rainfall in the east may lead to winter wheat planting delays, Meteorlogix said. Western areas could use more rain to favor emergence and early growth of wheat, the weather firm said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above resistance at the contract high of US$9.61 3/4. The next downside price objective for the bears is pushing prices below support at US$9.00. First resistance is seen at US$9.38 and then at Wednesday's high of US$9.44. First support lies at US$9.17 1/2 and then at US$9.00.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above resistance at the contract high of US$9.50 1/2. The bears' next downside objective is pushing prices below solid support at Wednesday's low of US$9.00. First resistance is seen at Wednesday's high of US$9.40 and then at the contract high of US$9.50 1/2. First support is seen at US$9.20 and then at US$9.10.