October 12, 2006

 

US Wheat Outlook on Thursday: Higher open on lower global production

 

 

U.S. wheat futures are called to open higher on Thursday's U.S. Department of Agriculture data, which showed global wheat production declines, analysts said.

 

Low production levels in drought-stricken Australia, in particular, may continue to boost U.S. wheat prices, analysts said. The USDA cut its estimate of 2006-07 Australian wheat production to 11 million metric tonnes.

 

Benchmark Chicago Board of Trade December futures are called to open 5-10 cents higher a bushel.

 

In e- CBOT trade, CBOT December wheat was up 3 cents at US$5.34 a bushel.

 

"The world ending stocks continued to show reduction," said Jason Roose of U.S. Commodities. "That will continue to show follow-through to the upside" for prices.

 

CBOT December wheat prices Wednesday hit another fresh contract high of US$5.31, exceeding the previous contract high of US$5.23.

 

A technical analyst said the bulls are still very strong but added the market is now short-term overbought, technically. He said it is due for a "profit-taking pullback very soon."

 

The analyst said bulls' next upside price objective is to produce a close above strong longer-term resistance at US$5.44 a bushel. The next downside price objective for the bears is closing prices below solid support at US$4.80 a bushel.

 

First resistance is seen at US$5.35 and then at US$5.40. First support lies at US$5.25 and then at US$5.20.

 

A CBOT floor source said he expected concerns about Australia's drought to support prices. He noted news that low production may prompt Australia's AWB Ltd. to ship at least 125,000 tonnes of European-origin wheat to India under a contract with State Trading Corp. to supply 595,000 tonnes by February 2007.

 

AWB will cease wheat exports from east coast ports after the current contracts are filled but continue shipments from Western Australia and South Australia, a company spokesman said.

 

DTN Meteorlogix said again that no significant rainfall is expected in any of Australia's major growing areas during the next five to seven days.

 

Argentine crops in the central grain belt will see widespread showers and thunderstorms of 0.50-1.50 inches during the next two to three days, the weather firm predicted.

 

Meteorlogix said there should be some rain in the U.S. Southern Plains early next week and in most areas during the second half of next week.

 

In Brazil, meanwhile, losses in the Parana state's 2005-06 wheat crop were put at 46.5% for a total harvest of 1.2 million tonnes. Dry weather has also lowered production levels there.

 

In other news, Tunisia's state-run Office des Cereales said Thursday it bought 122,000 tonnes of European Union and Russian wheat, on a cost and freight basis. The wheat was purchased at prices ranging from US$210.88 a tonne and US$242.97/tonne in a tender that took place Tuesday.

 

Competitiveness of European Union wheat has risen on the world market in the last month, according the Strategie Grains' monthly analytical report released Thursday.

 

Tight world wheat stocks led Strategie Grains to project 2006-07 E.U. wheat exports to total between 12 million and 13 million tonnes, which is up from exports of 11 million tonnes in 2005-06.