October 30, 2006

 

US Wheat Outlook on Monday: 1-2 cents higher open with two-sided trading

 

 

U.S. wheat futures are expected to start Monday's day session slightly higher on firmer overnight trade, sources said.

 

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

 

In e-cbot overnight trade, December wheat was up 3/4 cents at US$5.09 1/4.

 

A CBOT floor analyst said wheat prices may feel a boost during the day session from soybeans futures, which climbed to new highs overnight on speculative buying.

 

Otherwise, there was little fresh bullish news so trading is expected to be two-sided, a CBOT floor trader said.

 

"The market is on the defensive," the trader said. "There's nothing to feed the bulls."

 

A technical analyst said bulls are still in technical control at CBOT, and their 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.

 

First resistance is seen at US$5.15 and then at US$5.20, the analyst said. First support lies at Friday's low of US$5.00 and then at US$4.95.

 

Traders said global supply concerns are still at the root of strong wheat prices. They said, however, that more fresh news is needed to push prices higher.

 

In one development, CBOT traders noted China has been dry in key wheat growing regions.

 

DTN Meteorlogix, a private weather firm, said rainfall is needed to support favorable wheat growth, especially in eastern areas. Dry weather, however, is expected to continue at this time.

 

China's wheat prices held mostly stable in producing regions last week, although there were small rises in some areas on local shortages, analysts said. Some analysts said they expected prices to go higher.

 

In the Ukraine, rainfall last week and during the weekend helped improve soil moisture for developing wheat, Meteorlogix said. Colder weather and some rain or snow may cause field work delays during the coming week while also slowing wheat growth, the firm added.

 

Argentina also saw weekend rains, especially in the northern wheat areas, Meteorlogix said..

 

Argentina has harvested 6.6% of the 2006-07 wheat crop, compared to 3.3% at the same time last year, the Buenos Aires Cereals exchange said. The Exchange said 54.7% of the new wheat crop was in good or very good condition, 19.8% was average, 23.7% was poor and 1.8% was practically lost and not worth harvesting.

 

Argentina will produce 13.5 million metric tonnes of wheat in 2006-07, up from 12.5 million tonnes a year earlier, according to the government.

 

In Australia, which is suffering from a major drought, Meteorlogix said there is a chance for rainfall through the eastern wheat and summer crop areas later this week.

 

As for the U.S. Southern Plains, last week's precipitation has improved growing conditions across Kansas and Colorado. More rain is still needed, however, especially in Oklahoma, Meteorlogix said.

 

In other news, India's wheat plantings have begun in four central and south Indian provinces and are estimated at 182,200 hectares as of Oct. 27, the latest government data for winter sowing of crops showed Monday. The government didn't give corresponding figures for last year.

 

India hiked the intervention price for wheat for 2007 by INR100 per 100 kilograms to INR750, a government official said. The government purchases farm commodities from farmers at set intervention prices and sells them to consumers at subsidized rates.