November 24, 2006

 

US Wheat Outlook on Friday: Mixed start on steady overnight, no news

 

 

U.S. wheat futures are expected to start Friday's day session steady on nearly flat overnight trade and export sales that fell within industry estimates, sources said.

 

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

 

In e-CBOT overnight trade, CBOT December wheat was down 1/4 cent at US$4.86 a bushel and March wheat was up 3/4 cent at US$5.07.

 

The U.S. Department of Agriculture reported Friday morning that weekly export sales through the week ended Nov. 16 were 361,400 metric tonnes, within analysts' expectations of 300,000 tonnes to 500,000 tonnes. The sales were 12% above the previous week but 37% under the prior 4-week average, the USDA said.

 

The biggest buyers were Japan, which took 67,000 tonnes, and Egypt, which took 60,700 tonnes. News of those sales had previously been announced and were already factored into futures prices, traders said.

 

Weekly export sales of corn and soybeans, however, were seen as "solid" and may buoy wheat prices higher, a CBOT floor trader said.

 

In other export news, three South Korean flour mills jointly bought 21,200 tonnes of U.S. No.1 wheat in a tender concluded on Thursday, a trader in Seoul said. Delivery is scheduled between Jan. 20-Feb. 20.

 

"There's really nothing out there to push prices," a CBOT floor source said.

 

There was no trading Thursday at CBOT, the Kansas City Board of Trade and Minneapolis Grain Exchange because of the Thanksgiving holiday. Trading is slated to end at 1 p.m. EST Friday.

 

CBOT December wheat ended higher Wednesday, although a technical analyst said the market is still in a well-defined four-week-old down trending channel on the daily bar chart.

 

The next downside price objective for the bears is closing CBOT December wheat 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, the analyst said.

 

First resistance is seen at Wednesday's high of US$4.89 and then at US$4.95. First support lies at Wednesday's low of US$4.79 and then at this week's low of 4.72 1/2, the analyst said.

 

Although U.S. trading was closed, spot wheat was priced Thursday at the Rosario Cereals Exchange in Argentina for the first time in nearly three weeks. Trade had been frozen on uncertainty surrounding an expected government intervention to keep down domestic prices in an attempt to control bread prices, an important component of the inflation index.

 

This week, Argentina's agriculture secretary announced a plan to require exporters to sell one half of a tonne of discounted wheat to millers for every tonne that they export.

 

Shower activity Thursday and during the next few days should help maintain soil moisture for Argentine summer crops, the DTN Meteorlogix weather firm said.

 

In China, moderate to heavy rains in the southern part of the North China Plain and the Yangtze River valley during the past 48 hours helped recharge soil moisture, Meteorlogix said. The northern areas had only some light rain yesterday, mainly in Henan province and bypassing Shandong province, which has seen parched conditions since September.

 

Three Chinese provinces said Thursday they will auction a total of 1.2 million metric tonnes of wheat on Saturday. Local grain authorities hold auctions to sell wheat bought under the government's minimum purchase price program.

 

Auctions scheduled for Saturday will probably ease a recent shortage in wheat supplies that helped prices surge, analysts said.

 

In the U.S. Southern Plains, temperatures continue at above-normal levels into Tuesday before much colder weather arrives, Meteorlogix said. Any precipitation associated with this cold front should be on the light side, the firm said.

 

Ukraine also should see drier conditions during the next 10 days as a pattern of below-average rainfall continues, the firm said. Soil moisture for wheat should diminish during that time, Meteorlogix said.

 

The weather pattern in Australia continues to be hot and drier than normal through central and eastern crop areas during the next 10 days, Meteorlogix said. This will mostly favor the harvest of the drought-reduced wheat crop, the firm said.

 

Most of Australia, including major summer cropping areas, faces the likelihood of average rainfall in summer, which is also likely to be warmer than normal, the government's Bureau of Meteorology reported Friday. A small area in north Queensland has a slightly increased chance of below-average falls in December through February, the bureau reported in a monthly review of the three-month outlook.