October 24, 2006

 

US Wheat Outlook on Tuesday: Lower opening on weak overnight trade

 

 

U.S. wheat futures are expected to start Tuesday's day session lower on weaker overnight trading and a lack of fresh news, sources said.

 

Benchmark Chicago Board of Trade December wheat is called to open down 1-2 cents per bushel.

 

In e-cbot overnight trade, December wheat was 1 3/4 cents lower at US$5.15 1/4.

 

"I don't really see much out there," one CBOT floor trader said about news that could influence prices.

 

He said recent light-volume trading has made prices volatile and trading will likely be choppy.

 

CBOT December wheat prices Monday closed solidly higher, and a technical analyst said bulls still have solid near-term technical advantage.

 

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 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 Monday's high of US$5.21 1/2 and then at US$5.25, the analyst said.

 

"We're going to see two-sided trading," a CBOT floor source said.

 

CBOT floor sources said rumors about an Iraqi tender are still circulating and could support prices. Plus, there are ongoing bullish concerns about weather affecting production, a source said.

 

DTN Meteorlogix said in Ukraine there is little chance for significant rainfall during the next seven days. Dryness since the first week of September has reduced available top soil moisture for developing wheat, especially through the west and central locations, the weather firm said.

 

In the U.S. Southern Plains, there is a better chance for some rain during the next few days, the firm said. Rainfall is needed to improve the condition of the wheat crop, especially in Oklahoma, Meteorlogix said.

 

More moisture is also needed in Australia, which has been suffering a severe drought.

 

Australia said Tuesday that it would increase the geographic area and the number of farmers eligible for drought assistance from the government. The expansion will take the area of Australia's farm land now covered by support to more than 50%, an official said.

 

Treasurer Peter Costello, meanwhile, said Western Australian wheat growers should be allowed to seek a higher price for their exports than currently available through monopoly wheat exporter AWB Ltd.

 

Unlisted Western Australian grain concern Cooperative Bulk Handling Ltd. has said it wants to break into bulk wheat exports and offered to pay wheat growers more per tonne than AWB.

 

In other news, Japan is seeking 77,000 metric tonnes of wheat in a routine tender to be concluded Thursday. It includes 20,000 tonnes of U.S. western white wheat and 20,000 tonnes of dark northern spring wheat.

 

The U.S. Department of Agriculture reported that 86% of the winter wheat crop was planted, compared with 86% in 2005 and the five-year average of 87%. In the U.S., 65% of the wheat crop has emerged, compared with 64% in 2005 and the five-year average of 67%.

 

Some states, however, are below average in both categories.

 

In Ohio, for one, 57% of the soft wheat crop is planted compared with the five-year average of 82%. Some 22% of the crop has emerged, well below the five-year average of 51%.

 

A CBOT floor trader said he was particularly concerned that soft red wheat acres were "struggling."