October 26, 2005

  

US Wheat Outlook on Wednesday: Mixed on technical support, exports

 

 

U.S. wheat futures were called to open mixed Wednesday as follow-through technical buying after Tuesday's short-covering rally may be tempered by caution amid a lack of news about rumored Iraqi purchases of U.S. wheat, brokers said.

 

In the overnight e-CBOT session, most-active December wheat at the Chicago Board of Trade closed up 3/4 cent at US$3.26 1/4 after settling Tuesday near the session high on short covering from this week's drop to a one-month low.

 

"Bears still have downside technical momentum," said Jim Wyckoff, a technical analyst. "A retest of the late-August low of US$3.16 1/2 is still likely. It will take a close back above US$3.40 to provide the bulls with fresh upside momentum."

 

First resistance for CBOT December wheat was seen at US$3.28 and then at US$3.30. First support was put at US$3.22 1/2 - this week's low - and then at US$3.20.

 

Overnight U.S. wheat export sales were quiet, while traders awaited any announcement from Iraq about potential purchases of up to 1 million metric tonnes of U.S. wheat, assumed to be hard red winter wheat.

 

Iraqi officials said Monday that an announcement would be made shortly, and said that they had rejected Australian offers.

 

Some U.S. wheat traders also noted support from nascent concerns about the U.S. winter wheat crop, last reported by the U.S. Department of Agriculture to be 57% in good to excellent condition versus last year's 76% in that shape. Other wheat brokers said it was too early in the crop year to price in crop condition concerns.

 

Cash U.S. hard red winter wheat basis bids were mostly steady Wednesday; soft red winter wheat basis bids were steady to firm, with a 4-cent gain in Cincinnati, an 8-cent gain in Memphis and a 9-cent gain in Louisville, Ken.; and spring wheat basis bids were steady to firm, with a 10-cent gain in Minneapolis rail bids, grain merchandisers said.

 

News from key exporter Australia that its crop could total a hefty 23 million-25 million metric tonnes could also limit U.S. wheat futures gains on Wednesday, brokers said.

 

Australia's monopoly exporter AWB Ltd. (AWB.AU) on Wednesday boosted its production forecast for the new wheat crop to a range of 23 million to 25 million metric tonnes from a previous long-standing estimate of a range of 21 million to 23 million tonnes. The national five-year annual average is 20.85 million tonnes.

 

The USDA attache on Tuesday forecast Australia's 2005-06 wheat crop at 21.9 million metric tonnes.

 

In other global wheat news, Pakistan said it hoped to grow 22 million metric tonnes of wheat this year and would increase the wheat support price for farmers to PKR415 per 40 kilograms from PKR400 per 40 kg last year to encourage production.

 

However, Ukraine said it was likely to grow only 9 million tonnes of winter wheat in 2006, down from the 2005 harvest of 17.54 million tonnes, due to dry planting conditions.