November 17, 2006

 

US Wheat Outlook on Friday: 1/2-1 cent Higher on firmer overnight bounce

 

 

U.S. wheat futures are expected to start Friday's day session modestly higher on firmer overnight trading, although prices are vulnerable to downside movements, sources said.

 

Benchmark Chicago Board of Trade December wheat is called to open 1/2 to 1 cent per bushel firmer.

 

In e-BOT overnight trading, December wheat was 1 1/4 cents higher at US$4.70.

 

CBOT December wheat closed near session lows in Thursday's day session and the overnight gains were seen as a slight rebound, sources said. A technical analyst noted CBOT December wheat Thursday hit a fresh five-week low.

 

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

 

First resistance is seen at US$4.75 and then at US$4.80. First support lies at Thursday's low of US$4.67 and then at US$4.60, the analyst said

 

"Bulls are fading," he said.

 

The slow pace of export business amid tight global supplies remains a concern, analysts said. There also was no fresh fundamental news out overnight to feed the bulls, a CBOT floor source said.

 

Japan said Friday it was seeking 170,000 metric tonnes of wheat, including 90,000 tonnes of U.S, wheat, in a tender to be concluded Wednesday for shipment between Jan. 1-31. The tender seeks western white wheat, hard red winter wheat and dark northern spring wheat from the U.S.

 

"I don't see it as supportive because it's not soft red wheat," the floor source said. "It's routine business. Japan buys a lot of wheat."

 

Ukraine's state reserve reported Friday that through Nov. 16, it had concluded only 43.4% of its planned grain purchases for the current marketing year. The state reserve said farmers in some regions were reluctant to sell their grain and waiting for prices to go up.

 

The Ukrainian government imposed a grain export quota of 1.603 million tonnes for the rest of this year and said it would only revise the decision when and if the state reserve had completed all the planned grain purchases.

 

There is ongoing confusion over the export quota rules, however, as Ukraine's customs service announced Friday it had lifted an export ban imposed after a Kiev court ruled the quotas were illegal. The economy ministry, meanwhile, suspended some export licenses and some traders couldn't export their contracted grain, sources said.

 

Ukraine's western crop areas are expected to be mainly dry during the next 10 days, which will reduce available soil moisture for wheat, DTN Meteorlogix said.

 

There are also problems in India, which has seen congestion at many ports after receiving a surge of deliveries of wheat, sources said. More than 400,000 tonnes of wheat is estimated to be lying at ports, yet to be lifted by the government and transported to warehouses.

 

There had been speculation that deliveries to India may be delayed because of tight international supplies, caused partly by a severe drought in Australia. But Australia's AWB Ltd. has delivered 500,000 metric tonnes of wheat to India's State Trading Corp. under the first of three contracts for the year, a government official said.

 

Meteorlogix said dry weather will continue in Australia during the next five to seven days and favor the harvest of the drought-reduced wheat crop.

 

A key wheat-growing province in China has seen drought conditions since September, and Meteorlogix said the country should remain mainly dry for another six to seven days. Long-range charts suggest a chance for rain next weekend but that is subject to significant day-to-day changes, the weather firm said.

 

Looking at U.S. conditions, the driest areas of the U.S. Southern Plains wheat belt, including most of Oklahoma and south central Kansas, are expected to stay mainly dry during the next seven days, DTN Meteorlogix said.

 

The eastern Midwest should also see drier weather for much of the next 10 days, and temperatures will turn much warmer through the middle of next week, the weather firm said.