November 7, 2006

 

US Wheat Outlook on Tuesday: 1-2 cents firmer on overnight, crop emergence

 

 

U.S. wheat futures are expected to start Tuesday's day session firmer on overnight strength and with support from some bullish weather concerns, sources said.

 

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

 

In e-CBOT overnight trade, December wheat was up 2 cents to US$5.

 

The USDA on Monday reported U.S. winter wheat progress was in line with five-year averages. Planting is 94% complete, matching the five-year average, and 82% of the crop has emerged, slightly below the five-year average of 83%, according to the report.

                                              

Low emergence in Ohio, Indiana and Michigan was seen as a concern. Early growth has been impacted by cool, wet conditions, sources said.

 

Some acres likely were lost, although weather forecasts are optimistic for improved conditions, an analyst said.

 

"We've got some emergence problems we're looking at," a CBOT floor source said. "Things look all right overall, but the eastern Corn Belt is a little bit of a concern."

 

The U.S. Southern Plains should see warmer temperatures and recent rains will help developing wheat, DTN Meteorlogix said.

 

Overseas, the private weather firm said China needs more rain, especially in the eastern areas. News about a drought in one key wheat growing province boosted prices during Monday's CBOT session.

 

Dry weather in Argentina is expected to continue for the balance of this week and early next week.

 

In the Ukraine, cold weather, snow and some rain during the past few days likely means delays in field work and wheat development, Meteorlogix said.

 

Ukraine exported two million tonnes of wheat between the beginning of the current marketing year and Oct. 31, customs authorities reported Tuesday. In October, Ukraine exported 389,000 tonnes of wheat, the authorities said.

 

In other news, India may set a new record in its wheat production in 2007 because of expanded acres, favorable weather and higher productivity, an official said. The country is working on a plan for a major jump in local output so that it doesn't need to import any wheat at all in 2007, he said.

 

India is set to become one of the world's largest wheat importers this year, although none has come from the U.S., apparently because the U.S. can't meet strict Indian import requirements.

 

CBOT December wheat closed higher Monday with support from some short covering and speculative bargain-buying, a technical analyst said.

 

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

 

First resistance is seen at Monday's high of US$5.01 and then at US$5.05. First support lies at Monday's low of US$4.94 1/2 and then at US$4.90, he said.

 

Trading activity is expected to be choppy in anticipation of Thursday's scheduled release of the U.S. Department of Agriculture crop production report, a CBOT floor source said.

 

"No one is aggressively pushing one way or another," he said.

 

The source noted CBOT December wheat contracts are starting to roll over.