November 14, 2006

 

US Wheat Outlook on Tuesday: 3-5 cents lower on overnight, high prices

 

 

U.S. wheat futures are expected to start Tuesday's day session lower on weaker overnight action and downward momentum from Monday's lower close.

 

Benchmark Chicago Board of Trade December wheat is called to open 3cents to 5 cents per bushel lower.

 

In e-CBOT overnight trade, December wheat was 3 3/4 cents weaker at US$4.73 1/4.

 

While there remain concerns about tight global supplies and expectations the U.S. will see more export business, wheat prices are still too high, a CBOT floor source said.

 

"We have to go lower before we can go higher," he said.

 

CBOT December wheat prices Monday closed near the session low and ended at a fresh four-week low close, a technical analyst noted. The market is in a well-defined three-week-old "downtrending channel" on the daily bar chart, he said.

 

Technical odds suggest a move to around US$4.60 in the near term, the analyst said.

 

The next downside price objective for the bears is closing prices below support at US$4.60 a bushel. The bulls' next upside price objective is to close prices above solid resistance at US$5.00 a bushel, he said.

 

First resistance is expected at US$4.80 and then at Monday's high of US$4.85. First support lies at Monday's low of US$4.75 and then at 4.70, he said.

 

Commodity Futures Trading Commission data released Monday was bearish for wheat futures, a CBOT floor source added.

 

The CFTC said in the week ended Nov. 7, funds were net long 37,748 contracts in CBOT wheat. They cut longs by 1,658 and shorts by 1,385.

 

"We've got so much length in the market still," the source said. "There are more contracts to sell."

 

The U.S. Department of Agriculture, meanwhile, reported 59% of the U.S. winter wheat crop was rated in good-to-excellent condition, unchanged from last week.

 

Illinois wheat crops rated in good-to-excellent condition, however, dropped 13 percentage points to 53%. Indiana's crops in the top-rated category were down 7 percentage points to 46%.

 

In Kansas, 59% of the Kansas wheat crop is rated in good-to-excellent condition, down 1 percentage point from last week, the USDA said.

 

The ratings drops are not considered a market-moving feature because the crops can still improve on favorable spring weather, an analyst said.

 

The USDA reported that 96% of the U.S. winter wheat crop was planted, compared to 96% last year and the five-year average of 96%. Ohio continued to lag behind its average pace, with 89% of the crop planted compared to 100% last year and the five-year average of 99%.

 

It's getting to the point where it will be to late to get much more planted, the analyst said.

 

Weather in the midwestern U.S. is expected to be cooler and wetter during the next few days, DTN Meteorlogix said. The driest areas of the Southern Plains wheat belt are expected to stay mainly dry during the next seven days, the weather firm said.

 

Overseas, Japan said it is seeking 125,000 metric tonnes of wheat in a routine tender to be concluded on Thursday for shipment Jan. 1-31.

 

Four South Korean flour mills also are jointly seeking 21,500 metric tonnes of U.S. No. 1 wheat in a tender to be concluded Wednesday.

 

Brazil is expected to surpass Egypt and the European Union this year and return as the world's largest wheat import market for the first time since 2000/01, the USDA said.

 

Brazilian production has fallen to only half of last year's level as the crop was hit by a combination of drought and frosts at the end of August and beginning of September. The shortfall will lead to higher import demand, and could result in greater wheat needing to be sourced from countries outside South America, the USDA said.

 

Russian wheat exports from July 1 to Oct. 31 fell to 4.3 million tonnes from 5 million tonnes a year earlier, the government said. Exports were slower this year because world prices fell in mid-September, while domestic prices remained fairly high, an official said.

 

Ukraine's wheat stocks on Nov. 1 totaled 6.25 million metric tonnes, down from 8.16 million tonnes a year earlier because of bad weather conditions.

 

Meteorlogix said eastern Ukraine should see the heaviest precipitation and the coldest weather during the next 10 days.