November 2, 2006

 

US Wheat Outlook on Thursday: 4-6 cents higher on strong exports, overnight

 

 

U.S. wheat futures are expected to start Thursday's day session firmer on stronger overnight trade and news that weekly export sales climbed to a marketing-year high.

 

Benchmark Chicago Board of Trade December wheat is called to open 4-6c per bushel firmer.

 

In e-cbot overnight trade, December wheat was 6 1/4 cents firmer at US$4.93 3/4.

 

The U.S. Department of Agriculture said net export sales for the week ended Oct. 26 were 938,700 metric tonnes, a marketing-year high. The sales are double the previous week and 91% over the prior 4-week average.

 

The biggest buyers were Iraq, with 400,000 tonnes, the Philippines, with 121,800 tonnes, and Mexico, with 86,100 tonnes.

 

Trade estimates had pegged export sales between 400 tonnes and 900 tonnes.

 

"That's a big number," Vic Lespinasse, a CBOT floor analyst with A.G. Edwards & Sons, said about the sales. "That's friendly."

 

CBOT grain and soybean futures traded higher overnight on speculative buying, sources said, and that trend will likely to continue into the day session.

 

"The whole floor is going to be hot," a CBOT floor source said.

 

Corn, in particular, emerged as a leader Wednesday and pulled wheat prices higher during the day session, sources said.

 

A technical analyst said wheat is no longer the leader of the grains. He said price action this week has mapped a bearish downside breakout from a descending triangle pattern on the daily bar chart.

 

"That does worry the wheat bulls a bit," he said.

 

The next downside price objective for the bears is closing CBOT December wheat prices below support at Wednesday's low of US$4.78 a bushel, the analyst said. Bulls' next upside price objective is to fill on the upside this week's downside price gap and also produce a close above strong resistance at US$5.00 a bushel.

 

First resistance is seen at Wednesday's high of US$4.94 and then at US$5.00. First support lies at US$4.80 and then at Wednesday's low of US$4.78, the analyst said.

 

In bearish news, Japan canceled a tender Thursday to buy 60,000 tonnes of U.S. and Australian wheat. The agriculture ministry gave no reason for canceling the wheat purchase, although Lespinasse said it was likely because of high prices.

 

"They're going to tighten their belts a little and wait to see if it breaks," Lespinasse said.

 

Two South Korean flour mills, meanwhile, jointly bought 21,500 metric tonnes of U.S. No. 1 wheat from trading house Cargill in a tender concluded late Wednesday, a trader in Seoul said Thursday.

 

In other export news, the Grain Board of Iraq said it didn't intend to issue any new wheat tenders this year but would ask local traders to supply imported wheat, instead. The wheat board apparently will buy the imported wheat from the traders.

 

On the weather watch, DTN Meteorlogix said the U.S. Southern Plains still need rain to ensure favorable germination and early development of wheat, especially in Oklahoma and Texas. It appears increasing rainfall during the next six to 10 days would be heaviest in Oklahoma and Texas, the firm said.

 

Cold and "unsettled" weather in the Ukraine is expected during the next five days, Meteorlogix said. The heaviest precipitation is expected in the east, where field work, planting activities and wheat crop development may be slowed.

 

In Argentina, most of next week looks dry, Meteorlogix said.