October 11, 2006

 

US Wheat Outlook on Wednesday: Modestly firmer on supply concerns

 

 

U.S wheat futures are called to open modestly firmer Wednesday on continuing supply concerns.

 

Sources said trading may be quiet in anticipation of Thursday's scheduled release of the U.S. Department of Agriculture's October crop report.

 

Benchmark Chicago Board of Trade December futures are called to open 1-2 cents higher a bushel.

 

In e-cbot trade, December wheat was up 1/2 cent to US$5.01 a bushel.

 

"I think the whole market will be quieter while people wait to see the report," one floor CBOT source said.

 

CBOT December wheat prices Tuesday hit another fresh contract high of US$5.23. A technical analyst said prices then backed off as the bulls became exhausted after Monday's limit-up move. CBOT Dec wheat closed up 7 cents to US$5.01.

 

"No chart damage occurred Tuesday and the bulls are still very strong," the technical analyst said.

 

He said the bulls' next upside price objective is to produce a close above strong resistance at Tuesday's contract high of US$5.23 a bushel. The next downside price objective for the bears is closing prices below solid support at US$4.60 a bushel.

 

First resistance is seen at US$5.10 and then at US$5.15. First support lies at Tuesday's low of US$4.93 and then at US$4.87.

 

Sources said bulls may feed on fresh news concerning the damage that Australia's extended drought may do to wheat production. The general manager for operations at the state's logistics concern said Wednesday that production of winter wheat crops will undershoot a forecast of 7.5 million metric tonnes.

 

Colin Tutt, of Cooperative Bulk Handling Ltd., said yield will more likely be from 6.5 to 7 million tonnes, down from 25 tonnes last crop year.

 

A spokeswoman for Exporter Wheat Australia Ltd., however, said the company is still talking with the Iraqi Grain Board about possible sales.

 

DTN Meteorlogix said no significant rainfall is expected in any major growing areas during the next 5-7 days.

 

In Argentina, the private weather firm said widespread showers and thunderstorms of .50-1.50 inches are expected throughout the central grain belt on Friday and Saturday.

 

The Southern Plains also have been seeing rain. Meteorlogix said some additional precipitation is likely during the first half of next week.

 

In other news, the Ukrainian government Wednesday approved a decision to impose quotas on grain imports. The quotas had been mooted in order to prevent shortages due to this year's smaller harvest and increasing exports.

 

At the same time, Ukraine said two million metric tonnes of contracted export grain are building up at the country's sea ports and at rail depots because exporters can't obtain export licenses from authorities.

 

Jordan, meanwhile, has bought 100,000 metric tonnes of hard wheat from Syria for delivery in December and January.