October 16, 2006

 

US Wheat Outlook on Monday: Up as low Aussie output remains a worry

 

U.S. wheat futures are expected to start Monday's day session firmer on continued concerns about tightening world supplies and, in particular, an ongoing drought in Australia, sources said.

 

Benchmark Chicago Board of Trade December wheat is called to open 5-7 cents per bushel firmer.

In e-cbot overnight trade, December wheat was up 5 3/4 cents to US$5.31 1/4.

 

"People are looking for wheat, if there's any out there," one CBOT floor source said.

 

A grains analyst at Rabobank Australia said Monday production from Australia's wheat crop likely would not rise above 10 million metric tonnes, an estimate that confirmed previous predictions of low crop output. If production drops to 10 million, it would be down more than 60% from the actual output of 25 million tonnes in last crop year.

 

Australian Prime Minister John Howard said the government would extend drought relief funding to wheat growers at an estimated extra cost of US$350 million. He said relief would be available to farmers in 18 drought-declared areas in New South Wales, Victoria and South Australia states and the Australian Capital Territory.

 

The government's Bureau of Meteorology has said an El Nino event has started, which implies weather in northern and eastern Australia will be warmer and drier than usual. But DTN Meteorlogix, a private weather firm, said, the outlook for this week shows some potential for showers in Australia's eastern wheat areas.

 

The weather firm also predicted rain for Argentina, another country whose wheat growers have been hit with dry weather this year. Meteorlogix said widespread showers were possible during the weekend, with the heaviest moisture over Buenos Aires, southeast Cordoba and southern Sante Fe.

 

In the U.S. Southern Plains, Meteorlogix said recent rain had improved soil moisture conditions for planting and developing wheat.

 

A technical analyst, meanwhile, predicted CBOT day trading would be volatile in the near term.

 

He said bulls still have solid technical advantage and that their next upside price objective is to produce a close above strong resistance at the contract high of US$5.50 a bushel. The next downside price objective for the bears is closing prices below solid support at US$5.00 a bushel, he said.

 

First resistance is seen at Friday's high of US$5.39 and then at US$5.50. First support lies at Friday's low of US$5.20 and then at US$5.11.

 

In other news, Ukraine on Friday issued the first licenses for the export of milling wheat since a new licensing system was imposed. Wheat shipments had built up at sea ports and in rail yards but workers have now begun loading grain at ports, officials said.

 

So far, the licenses were issued only for the grain to be loaded on ships that were already waiting at the ports.

 

In related news, Ukraine said Monday that its wheat stocks were lower this year over last year because of bad growing weather and more exports. Wheat stocks in Ukraine on Oct. 1 totaled 7.33 million metric tonnes, 2.52 million tonnes less than on the same date last year, the state statistics committee reported.

 

Wheat stocks held by grain producers on Oct. 1 totaled 3.42 million tonnes and stocks at grain processing storage facilities totaled 3.91 million tonnes. Ukraine's total grain stocks on Oct. 1 totaled 13.51 million tonnes, compared with 17.56 million tonnes on the same date last year.