October 27, 2006

 

US Wheat Outlook on Friday: Prices 9-11 cents firmer on Australia, Iraq

 

 

U.S. wheat futures are expected to start Friday's day session firmer on a new Australian government estimate that slashes expected wheat production, sources said.

 

The U.S. Department of Agriculture also said Friday Iraq had bought 400,000 metric of U.S. hard red winter wheat.

 

Benchmark Chicago Board of Trade December wheat is called to open 9-11 cents per bushel higher.

 

In e-cbot overnight trade, December wheat was up 11 1/2 cents to US$5.19.

 

Australia's official wheat production forecast was revised sharply lower Friday to 9.5 million metric tonnes, a 62% drop from actual output of 25.1 million tonnes last crop year. The country has suffered from a severe drought, and industry members have previously estimated production would be about 10 million tonnes.

 

Still, the fresh estimate will support prices, CBOT floor sources said.

 

The new forecast came from the Australian Bureau of Agricultural & Resource Economics, or ABARE. The bureau estimated Sept. 19 that production would be 16.4 million tonnes.

 

"Australia's new, lower crop estimate is the news for the opening," one CBOT floor source said.

 

DTN Meteorlogix, a private weather firm, said rainfall potential was limited Friday for West Australia and eastern growing areas. A recent U.S. Department of Agriculture attache report, however, said rain this late in the season may not be able to significantly benefit the crops any longer.

 

Ukraine also has seen dry conditions. Meteorlogix said rainfall there during the past couple of days has helped ease dryness concerns and the region looks to be much more active during the next six to 10 days.

 

Argentina also will see episodes of scattered showers and thunderstorms during the next few days, the weather firm said.

 

As for the U.S. Southern Plains, a widespread rain event is forecasted for Kansas, along with rain or snow in Colorado. Oklahoma, however, still needs more precipitation, Meteorlogix said.

 

Foreign demand for wheat imports from the U.S., Canada and Russia is expected to strengthen now that other major producing countries are restricting exports to guard stocks or supply strong domestic consumption, the industry group U.S. Wheat Associates said Thursday.

 

Ukraine has set quotas to limit its wheat exports this year; Australia has "banned all exports from its eastern coast and said it is unable to make bids on new sales;" and Argentina is considering an export tax, the U.S. group representing U.S. wheat exporters said in a letter.

 

U.S. wheat prices settled lower Wednesday and Thursday in price action that a technical analyst said encourages bears a bit. Bulls' next upside price objective is to produce a CBOT 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 Thursday's high of US$5.16 and then at US$5.20. First support lies at Thursday's low of US$5.05 and then at US$5.00, he said.

 

In other news, Egypt's state-owned General Authority For Supply Commodities on Friday bought 60,000 tonnes of U.S. soft white wheat and 120,000 tonnes of Russian wheat. CBOT floor traders said the sale was expected and would not affect prices much.