October 19, 2006

 

US Wheat Outlook on Thursday: Firmer open seen in rebound

 

 

U.S. wheat futures are expected to start Thursday's day session firmer on momentum from higher overnight trade, sources said.

 

Benchmark Chicago Board of Trade December wheat is called to open 3-4 cents per bushel firmer

 

In e-cbot overnight trade, December wheat was 4 3/4 cents firmer at US$5.17 1/4.

 

Prices climbed higher overnight in a bit of a rebound to Wednesday's lower close, a CBOT floor source said.

 

"People still want to own this stuff," the source said about wheat. "The market is still very, very nervous."

 

U.S. Department of Agriculture said net weekly export sales for wheat were 445,300 tonnes, 36% below the previous week and 11% under the prior four-week average. Trade estimates called for commitments in the 250,000 to 600,000 tonne range. The biggest buyers were Guatemala, buying 65,800 tonnes and the Dominican Republic with 44,500 tonnes.

 

In other export news, Japan bought 125,000 metric tonnes of U.S. and Australian wheat in a routine tender concluded Thursday. The U.S. supplies included 39,000 tonnes of dark northern spring wheat, 25,000 tonnes of hard red winter wheat and 6,000 tonnes of western white wheat.

 

A technical analyst noted profit-taking pressured CBOT prices down Wednesday and said a market top could be near. Overall, however, he said bulls are still strong.

 

The bulls' next upside price objective is to produce a close above strong resistance at the CBOT December contract high of US$5.57. The next downside price objective for the bears is closing prices below solid support at US$5.00.

 

First resistance is seen at US$5.20 and then at Wednesday's high of US$5.25. First support lies at US$5.10 and then at US$5.05.

 

Global supply concerns have largely been responsible for driving December prices up to contract highs in recent days, sources said, and those worries remain. In particular, a severe drought in Australia has slashed production estimates there.

 

DTN Meteorlogix said in Australia there is a chance New South Wales on Friday will receive 0.25-1.00 inch of rain. The rest of the wheat-growing areas will only receive a few light showers, the private weather firm said.

 

In Argentina, showers will mainly occur in the southern wheat areas during the next few days, Meteorlogix said. Showers or thundershowers may develop through the northern wheat areas early next week.

 

Meteorlogix said more rain is needed in the U.S. Southern Plains to support wheat development before dormancy. The chances for significant rainfall are mostly in the eastern belt, the weather firm said.

 

The Ukraine's railway authority, meanwhile, announced that it had suspended the transportation of export grain to several Black sea ports until further notice. The suspension is being imposed because sea ports are overloaded following the government's introduction of grain export licenses and of imposed grain export quotas.

 

The U.K. exported 161,610 metric tonnes of wheat in August, according to U.K. trade data issued Thursday. The level is up from the 28,291 tonnes exported in July but still 39% behind the 2005-06 pace at two months into the 2006-07 campaign. Traders blame the slow start on this season's harvest delays caused by wet weather and solid internal demand.