October 18, 2007

 

US Wheat Outlook on Thursday: Egyptian tender will set the tone

 

 

U.S. wheat futures are expected to start Thursday's day session mixed, with traders waiting for the results of an Egyptian tender to set the tone.

 

In e-cbot overnight trading, Benchmark Chicago Board of Trade December wheat rose 1/2 cent to US$8.21 per bushel.

 

Egypt's state-owned General Authority for Supply Commodities said after the close of markets Wednesday that it was tendering to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Nov. 21-30 and Dec. 1-10, on a free-on-board basis. Traders said they expected the business to go to Russia, although a breakdown of bids showed the U.S. wheat becoming more competitive on the world market, a CBOT floor broker said.

 

U.S. wheat markets have been waiting for news of unexpected export business to kick prices higher, and a sale to Egypt would be supportive, traders said.

 

The U.S. Department of Agriculture said weekly export sales for the week ended Oct. 11 were 1.09 million metric tonnes, including sales for delivery in 2007-08 and 2008-09. Analysts had estimated total sales would be 800,000 tonnes to 1.65 million tonnes.

 

"Export sales are solid and right in line with expectations," a CBOT floor trader says.

 

Sales of 984,500 tonnes for delivery in 2007-08 were 5% above the previous week but 28% below the prior four-week average, the USDA said. Among the top buyers for 2007-08 delivery were Iraq, which took 400,000 tonnes; the Philippines, which bought 226,500 tonnes; and South Korea, which bought 158,800 tonnes.

 

Sales for delivery in 2008-09 totaled 107,000 tonnes. Unknown destinations bought 50,000 tonnes, and the Philippines bought 45,000 tonnes, according to the USDA.

 

In other export news, Japan said it bought 85,000 tonnes of wheat, including 65,000 tonnes from the U.S., in a routine tender. The entire shipment is expected to arrive Dec. 1 to Jan. 10.

 

The European Union is expected to export 8.2 million tonnes of wheat in 2007-08, up 900,000 tonnes from the previous month's estimate, Strategie Grains said in a new report. The upward revision was made on the back of an anticipated reduction in exports from Australia due to drought, and from the Ukraine, which is constrained by its export quota.

 

The report said E.U. wheat had become more competitive against U.S. wheat for export to Algeria and Morocco but less competitive against the U.S. for Egypt.

 

Strategie Grains pegged E.U. 2007-08 soft wheat output at 112.7 million tonnes, down 2 million tonnes from last month's estimate and 4.2 million tonnes less than the previous crop. Reductions in soft wheat output in France, the U.K., Denmark and Poland caused the revision.

 

Kazakhstan, meanwhile, is planning to export 10 million metric tonnes of grain in the 2007-2008 marketing year, up from about 8 million tonnes the previous year.

 

Ukraine planted winter wheat on 6 million hectares, compared with 5.631 million hectares a year earlier, according to the agriculture minister. Planting is complete in most regions of Ukraine, except some southern regions.

 

Drier and warmer weather is on tap for eastern Ukraine and southern Russia during the next five to seven days, Meteorlogix said. The conditions will favor field work but reduce soil moisture for winter grains, the weather firm said.

 

Traces of rain fell on some wheat lands near Australia's southwest coast, but elsewhere dry weather continued to dog the nation's winter crops, including wheat, according to data from the government's Bureau of Meteorology. The Meteorlogix forecast calls for mainly dry weather, with the possibility of light showers, during the next week.

 

"Dry weather favors maturing crops and early harvests in the north but is still very unfavorable for any late filling crops in the south," Meteorlogix said.

 

The senior management of Australia's majority wheat exporter AWB Ltd. will meet Iraq's trade minister in Melbourne to discuss a resumption of the wheat trade, a company spokesman, said Thursday. Iraq suspended commercial dealings with AWB early last year as details emerged of the company's behavior in the United Nations oil-for-food scandal that involved it paying kickbacks of USUS$221.7 million to the deposed regime of dictator Saddam Hussein.

 

Bulls' next upside price objective is to push CBOT December wheat above resistance at US$8.50, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below major psychological support at US$8.00. First resistance is seen at Wednesday's high of US$8.35 1/2 and then at US$8.41. First support lies at Wednesday's low of US$8.18 and then at this week's low of US$8.10.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing prices above resistance at US$8.60, the analyst said. The bears' next downside objective is pushing prices below support at US$8.18 3/4. First resistance is seen at Wednesday's high of US$8.43 and then at US$8.50. First support is seen at this week's low of US$8.25 and then at US$8.18 3/4.