November 13, 2006

 

US Wheat Outlook on Monday: 2-4 cents higher on overnight momentum

 

 

U.S. wheat futures are expected to start Monday's day session firmer on higher overnight trade and support from stronger corn prices, sources said.

 

Benchmark Chicago Board of Trade December wheat is called to open 2-4 cents per bushel firmer.

 

In e-cbot overnight trade, December wheat rose 3 1/4 cents to US$4.83 3/4.

 

Wheat futures have some upward momentum from the overnight, and tightened global supplies continue to be the root support of prices, a CBOT floor source said.

 

"We'll probably start higher, especially with the gains in corn," the source said. "Corn is still the leader."

 

Bulls are still looking new export business, however, and there was no fresh export news out over the weekend, the source said.

 

A CBOT floor trader noted CBOT December prices dipped lower during the overnight session before bouncing higher. He said the action indicated trading during the day session will be two-sided.

 

"There may be some unfinished selling," he said.

 

A key factor in smaller global wheat supplies has been a drought in Australia.

 

Australia's domestic wheat prices have fallen into a slump as end users, including those who feed grain to livestock and poultry, are becoming more comfortable with the domestic supply, a source said. As a result, they have been sitting out of the market to see what unfolds as the pace of harvest picks up.

 

ABB Grain Ltd. also has closed its number one collective domestic sales pool because of the decline in prices. It plans to open another, an ABB pool manager said.

 

China's wheat prices, on the other hand, were higher in producing regions last week because demand from mills exceeded supply, analysts said. The government is expected to release its wheat stocks to the market through auctions this week or next.

 

China's Shandong province, a key wheat growing area, has suffered from drought conditions since September.

 

The region was mainly dry during the weekend with near to above-normal temperatures, DTN Meteorlogix said. Light precipitation is possible, however, late this week or during the coming weekend, the weather firm said.

 

In India, wheat sowing is off to a good start with plantings estimated at 2.6 million hectares as of Nov. 9, up by around 1.0 million hectares from a year earlier, according to the latest government data for winter sowing.

 

Wheat, India's most important winter-sown crop in terms of output, is sown between October and December for harvest from February onwards. Sowing progress and subsequent production are factors that will determine the volume of India's wheat imports in 2007.

 

Syria said Sunday it was tendering to sell 50,000 metric tonnes of Syrian wheat, on a free on trucks basis. Syria is looking to sell 25,000 tonnes of durum wheat and 25,000 tonnes of soft milling wheat for delivery until the end of January 2007.

 

In the U.S., the Southern Plains are predicted to be generally dry, although some light precipitation is possible Tuesday, Meteorlogix said. A new rain storm in the Midwest will likely make for continued harvest delays in the eastern areas during this week.

 

But weather conditions will not pull prices up or down during the day session, the CBOT floor trader said. He said fund buying or selling would determine price movements.

 

A technical analyst said the next downside price objective for the bears is closing prices below solid support at US$4.50 a bushel for CBOT December wheat. Bulls' next upside price objective is to close prices above solid resistance at US$5.00 a bushel.

 

First resistance is seen at Friday's high of US$4.89 1/2 and then at US$4.90. First support lies at Friday's low of US$4.78 and then at 4.75, the analyst said.