October 23, 2006

 

US Wheat Outlook on Monday: Flat open on lack of fresh news

 

 

U.S. wheat futures are expected to start Monday's day session relatively flat without much news to influence prices, sources say.

 

Benchmark Chicago Board of Trade December wheat is called to open flat to 1 cent higher.

 

In e-cbot overnight trade, December wheat was 1/4 cent firmer at US$5.05 1/4 a bushel.

 

"There's nothing fresh to feed the bulls," one CBOT floor source said.

 

Some sources have said the U.S. wheat futures market may be reaching a top amid volatile, low-volume trading at high prices. A technical analyst added that CBOT bulls may be getting "exhausted" at higher levels.

 

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

 

First resistance is seen at Friday's high of US$5.15 1/2 and then at US$5.20. First support lies at Friday's low of US$5.02 1/2 and then at US$5.00, the analyst said.

 

Concerns remain about global wheat supplies, particularly over a production decline in Australia because of a severe drought, sources said. Still, lower production estimates have been around for several weeks, sources said.

 

Dry conditions largely persisted in Australia during the weekend. Some rain fell last Friday and Saturday but it was less than expected, according to DTN Meteorlogix.

 

The weather firm said the chance for more precipitation in Australia this week is "fairly limited."

 

"I'm not seeing anything new," a CBOT trader said.

 

Australian wheat exporter AWB. Ltd. on Monday hiked its returns estimates for pooled export sales. The company's acting general manager said a combination of market movements, cost-cutting initiatives and futures trading has resulted in an increase in the majority of its estimates of returns.

 

In related news, the Western Australian Farmers' Federation, a major lobbyist for wheat producers, has reiterated support for a wheat export monopoly from Australia. The group said, however, that it is not necessarily tied a program run by AWB Ltd.

 

In Argentina, meanwhile, the week's weather forecast features chances of rain and thunderstorms in most areas, Meteorlogix said.

 

Argentina said Friday it had harvested 4.7% of the 2006-07 wheat crop, compared to 2.6% at the same date last year. It said 53.5% of the new wheat crop was in good or very good condition,

 

As for the U.S. Southern Plains, the chances for significant rainfall are mainly in the east, Meteorlogix said.

 

In other news, four South Korean flour mills have jointly bought 21,500 metric tonnes of U.S. No. 1 wheat from trading house Cargill in a routine tender concluded late Friday, a trader in Seoul said on Monday. The supply includes 11,800 tonne of soft white wheat, 4,900 tonnes of hard red winter wheat and 4,800 tonnes of dark northern spring wheat.

 

In India, government wheat stocks as of Oct. 1 were 6.41 million metric tonnes, down 37.7% from 10.29 million tonnes a year earlier, the latest government data showed Monday.

 

India plans its imports of wheat on the basis of these stock levels, and a government official said the level was adequate.

 

Government stocks have largely declined because local traders found they could sell their stocks to private traders for more than the government-set intervention price.