October 9, 2006

 

US Wheat Outlook on Monday: Firmer on supply concerns

  

 

U.S. wheat futures are called to open firmer Monday on strong electronic trading over the weekend and weather forecasts that show little relief for parched areas of Australia and Argentina, sources said.

 

Benchmark Chicago Board of Trade December futures are called to open 17-20 cents higher a bushel.

 

In e-cbot trade, December wheat was 20 cents firmer at US$4.84.

 

"There's no wheat," a floor source said.

 

Indeed, the Grains Council of Australia said Monday that drought could drive the country's wheat production down by almost two-thirds, to less than 10 million metric tonnes from 25 million tonnes last crop year. In the face of a possible domestic shortage of grain, Australia has received applications to import a variety of grain types from a number of source countries, a government spokeswoman said.

 

"Growers are telling us that in many instances, crop failure will mean they simply won't be harvesting this year," with many crops being grazed by livestock or cut for hay, Grains Council Chairman Murray Jones said in a statement.

 

DTN Meteorologix said any rain in Australia during the next seven days will be scatted thundershowers confined to the western wheat belt.

 

The weather firm said conditions also remained dry in Argentina throughout the weekend, although there is a chance for an "important rain event" there later this week. More rain is particularly needed in Cordoba and northern La Pampa.

 

The weather firm predicted widespread rain early this week in the Southern Plains.

 

A technical analyst said wheat is the leader of the grains and "will likely continue to be so in the coming days and weeks."

 

He said the bulls' next upside price objective is to produce a close above solid resistance at the contract high. For bears, the next downside price objective is closing prices below solid support at US$4.50 a bushel. First resistance is seen at US$4.70 and then at US$4.75. First support lies at Friday's low of US$4.58 1/2 and then at US$4.55.

 

Analysts said bullish trading also may feed off potential supply trouble in Ukraine, where grain exports have ground to a halt. The Ukraine Grain Association said Monday that no export licenses had been issued since the government began requiring them Oct. 3.

 

It was not clear when licenses would begin to be issued. The association said ship and railway train queues were building up at Ukraine's sea ports, and storage facilities at the ports were overloaded.

 

In other news, Morocco over the weekend said it bought 117,000 metric tonnes of European Union soft wheat for delivery before the end of December.