November 21, 2006

 

US Wheat Outlook on Tuesday: Flat open on quiet overnight, slow news

 

 

U.S. wheat futures are expected to start Tuesday's day session steady after quiet overnight trade and without much fresh news to influence prices, sources said.

 

Benchmark Chicago Board of Trade December wheat is called to open flat.

 

In e-CBOT overnight trade, December wheat was down 1/4 cent at US$4.74 3/4 per bushel.

 

Wheat is seen as the weakest of the grains right now and will likely follow corn's general direction during the day session, a CBOT floor trader said. Corn is considered the leader of the grains, he said.

 

CBOT December wheat options expire Tuesday, the trader noted.

 

"Wheat will see what the rest of the floor wants to do," he said.

 

A technical analyst agreed wheat is a follower of the corn market.

 

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

 

First resistance is seen at US$4.80 and then at Monday's high of US$4.86. First support lies at Monday's low of US$4.72 1/2 and then at US$4.70, the analyst said.

 

Disappointment over export sales, which are considered slow amid a global supply shortage, is pressuring prices, sources said.

 

Concerns about unfavorable growing conditions for the U.S. winter wheat crop, however, are seen as bullish. Dry weather across the central U.S. will make it tough for wheat plantings to establish, an analyst said.

 

DTN Meteorlogix said very warm, dry weather in the U.S. Southern Plains this week will further deplete available soil moisture for wheat.

 

The U.S. Department of Agriculture reported Monday that 57% of the U.S. winter wheat crop was rated in good-to-excellent condition as of Nov. 19, two percentage points below a week earlier.

 

In Kansas, the country's largest wheat-producing state, the crop was rated 55% in good-to-excellent condition, down four percentage points from last week. In Oklahoma, 45% of the crop was in good-to-excellent condition, up two percentage points from last week.

 

In Ohio, 34% of the soft red winter wheat crop was rated in good-to-excellent condition, down 11 percentage points from last week.

 

The declines are worth watching, although it's difficult to read too much into early season ratings because winter wheat has a second season after it emerges from dormancy in the spring, an analyst said.

 

"It's still too early to write anything off," he said.

 

In China, the eastern Shandong province has been dry since September and will likely stay that way for the next several days, Meteorlogix said. Southern wheat regions, however, may see a more active weather pattern, the firm said.

 

Meteorlogix said there is a chance for showers through the west and central Ukraine during the next few days. Then, drier weather will likely return and soil moisture will likely diminish, the weather firm said.

 

In Australia, a hot, dry weather pattern appears to be in effect, Meteorlogix said. This will favor the harvest of the wheat crop, which has been hurt by a severe drought, the firm said.

 

Australian grain storage concern Cooperative Bulk Handling Ltd. reported Monday the harvest of winter crops in the Western Australia state was about one-third completed. CBH said it had received about 2.1 million metric tonnes of winter grains and oilseeds thus far, out of an expected total harvest of 6.5 million tonnes.

 

Typically, 70% of the state's crop is wheat, so CBH's forecasts suggest wheat production of around 4.55 million tonnes, down from an actual 9.5 million tonnes last crop year ended March 31, 2006.

 

In Argentina, scattered thundershowers may return during the coming weekend to help maintain favorable conditions for crops, Meteorlogix said.

 

In other news, the U.S. is seeking greater market access for wheat trade in India, U.S. Department of Agriculture Secretary Mike Johanns said Tuesday. He said India sells more farm products to the U.S. than vice versa.

 

Despite being a large exporter worldwide, the U.S. hasn't been successful in selling wheat to India because of very stringent sanitary and plant-health norms in India, Johanns said. He said he would like to see India's plant-health norms protected while wheat trade occurs with the U.S.