November 3, 2006

 

US Wheat Outlook on Friday: Overnight; seen as follower

 

 

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

 

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

 

In e-cbot overnight trade, December wheat was 2 1/2 cents lower at US$4.89.

 

There was no significant news overnight for wheat, and prices will likely follow activity in corn and soybeans during the day session, a CBOT floor source said. Corn and soybeans also are called to open weaker.

 

"We've been followers and I think we'll continue to be followers," the source said.

 

Profit-taking before the close Thursday continued overnight and is expected during Friday's day session, sources said.

 

CBOT December wheat prices Thursday closed near the session low after sharp, early gains. A technical analyst said a downtrend from the October high remains intact.

 

Bulls are worried somewhat because wheat is no longer the leader in the grain markets, the analyst said.

 

"The market's been looking tired," a CBOT floor trader said.

 

The next downside price objective for the bears is closing prices below support at this week's low of US$4.78 a bushel, the analyst said. The bulls' next upside price objective is to close prices above solid resistance at Thursday's high of US$5.10 a bushel.

 

First resistance is seen at US$4.95 and then at US$5.00. First support lies at Thursday's low of US$4.88 and then at 4.80, the analyst said.

 

In news, Australian agribusiness AWB Ltd. on Friday said it will cut a services fee it charges to operate a wheat export monopoly by 39% in the face of a severe drought that has slashed wheat production and sharply limited export availability.

 

AWB forecasts national new crop wheat output in a range of 9 million tonnes to 11 million tonnes, down from actual output of 25 million tonnes last crop year.

 

That low production estimate has previously been announced, along with other global supply concerns.

 

"Theres not much going on with wheat," the CBOT floor source said. "All the knowns are pretty much known."

 

Weather forecasters have said it is probably too late for rain to help Australia's crops. But DTN Meteorlogix, a private weather firm, said rain and thunderstorms will likely delay the wheat harvest in eastern Australia.

 

Meteorlogix said the U.S. Southern Plains still need rain to ensure favorable germination and early development of wheat, especially in Oklahoma and Texas. Rainfall seen during the next six to 10 days would be heaviest in those states, the firm said.

 

In the Ukraine, the west should see cold temperatures and only light moisture through Monday, while the east should see heavier precipitation over the weekend, Meteorlogix said. The entire region should be drier and warmer next week.

 

Dry weather is expected to continue in China, where eastern wheat growing regions need more rain to support favorable wheat development, the firm said.

 

China's Henan and Anhui provinces will auction 1 million metric tonnes of summer-harvested wheat Friday and Saturday, a government-backed think-tank said.