October 20, 2006

 

US Wheat Outlook on Friday: Seen up 5-7 cents on hopes of Egypt business

 

 

U.S. wheat futures are expected to start Friday's day session higher on hopes of attracting some Egyptian wheat business and on higher overnight trade, sources said.

 

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

 

In e-cbot overnight trade, CBOT December wheat was 7 cents higher at US$5.20.

 

Egypt's state-owned General Authority For Supply Commodities issued a buy tender Thursday for 55,000-60,000 metric tonnes of wheat for shipment Nov. 21-30. As part of the tender, Egypt is seeking U.S. wheat, among other origins.

 

Analysts said the new demand would give wheat prices a boost as other bullish fundamentals are petering out. Worries about production in drought-ravaged Australia, for example, are now old news, some sources said.

 

"We're looking for anything supportive," one CBOT floor source said.

 

Three South Korean flour mills, meanwhile, have jointly bought 23,800 tonnes of U.S. No. 1 wheat from Cargill in a tender concluded Friday. The shipment includes two grades of soft white wheat totaling 10,800 tonnes, 4,500 tonnes of hard red winter wheat, and two grades of dark north spring wheat totaling 8,500 tonnes.

 

The entire shipment is expected to arrive between Dec. 5-Jan. 5.

 

A technical analyst said recent volatile trading of wheat futures at higher price levels is a warning sign that a market top could be near. Bulls in the CBOT wheat market may be getting "exhausted" at higher levels, he said.

 

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

 

First resistance is seen at US$5.20 and then at US$5.25. First support lies at Thursday's low of US$5.09 and then at US$5.05, the analyst said.

 

On the weather watch, DTN Meteorlogix said in Australia 0.25-0.74 inch of rain is possible Friday through New South Wales. The weather firm added, however, that it may be a week or more before there is another chance for showers in this area.

 

In the U.S. Southern Plains, there are chances for significant rainfall mostly in the eastern and northern areas, Meteorlogix said.

 

"More rain is needed to support favorable development of wheat prior to dormancy," the 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 next week, the firm said.

 

Argentine spot and wheat futures prices have tumbled over the past week as exporters have stepped out of the market to drive down domestic prices, analysts said. Domestic wheat trade has been largely frozen on rumors that the government is poised to step in to limit exports in an attempt to rein in domestic wheat prices and inflation.

 

In other news, the European Commission issued import licenses for 5,840 tonnes of wheat under the E.U. import quota for low- and medium-quality wheat in the week ended Oct. 16. Of the tonnenage awarded, all was in the "other" contingent with none for the Canadian or U.S. contingent.