November 29, 2005

  

US Wheat Outlook on Tuesday: Up 1-2 cents on technicals, US crop condition

  

 

U.S. wheat futures were called to open up 1-2 cents per bushel Tuesday on technical buying and the government's report Monday of a larger-than-expected deterioration in the U.S. winter wheat crop's condition, brokers said.

 

The U.S. Department of Agriculture said Monday in its final weekly crop progress report of 2005 that 52% of the winter wheat crop was in good-to-excellent condition, down 3 percentage points from the previous week.

 

Most of the crop deterioration was found in hard red winter wheat-growing states, particularly in Oklahoma and Texas.

 

In Oklahoma, 41% of the crop was in good-to-excellent condition, behind last week's rating of 46%; and in Texas, 17% of the winter wheat crop was in good-to-excellent condition, down from last week's rating of 27%.

 

Still, the declines in ratings should only have a limited impact on futures prices as 70% of the crops in the hard wheat states are already in dormancy, said Shawn McCambridge, senior grains analyst with Prudential Financial in Chicago.

 

In the overnight e-CBOT session, March wheat at the Chicago Board of Trade closed up 2 1/2 cents at US$3.15 3/4 after setting a new contract low during Monday's open outcry session of US$3.10; and December ended up 2 1/4 cents at US$2.99 3/4.

 

The 9-day relative strength indices for December and March ended the overnight session at 31 and 34, respectively. A level of 30 or below indicates oversold conditions.

 

First technical resistance for CBOT March was seen at US$3.15 and then at US$3.18. First support lies at US$3.10 - Monday's contract low - and then at US$3.08.

 

Positioning was expected on Tuesday ahead of Wednesday's first notice day for deliveries against the three front-month U.S. wheat futures contracts.

 

Traders expected deliveries in Chicago on Wednesday to total between 2,000 and 4,000 lots; deliveries in Kansas City were expected to be lighter; and deliveries in Minneapolis were seen even lighter, at up to 500 lots.

 

Cash U.S. hard red winter wheat basis bids were steady to firm Tuesday; soft red winter wheat basis bids were mixed, with a 10-cent gain in Louisville, Ken.; and spring wheat basis bids were steady to weak, with 5-cent losses in the Minneapolis rail and Duluth, Minn., basis bids, grain merchandisers said.

 

Overnight U.S. wheat export news was quiet.

 

In global wheat news, the Australian Bureau of Agricultural & Resource Economics forecast the 2005-06 Australian wheat crop Tuesday at 24.1 million metric tonnes, up 18% from actual output of 20.4 million tonnes last crop year ended March 31.

 

The forecast is also sharply above the September projection of 19.7 million tonnes, largely reflecting the impact of good spring rains and mild temperatures.

 

In Asia, China's eastern Shandong province plans to auction 75,000 metric tonnes of local wheat reserves Wednesday.

 

The CFTC reported late Monday that speculators for CBOT wheat futures only boosted their net short for the week ended November 22. They increased short holdings by 1,630 lots to hold 104,082 short positions and decreased their long holdings by 1,499 lots to hold 50,454 long positions.

 

For CBOT wheat futures and options combined, speculators were short 103,980 lots, up 748 contracts from the week before, and long 48,518 contracts, down 1,054 lots from the previous week.

 

For KCBT wheat futures only, speculators for the week ended Nov. 22 cut their net long stance. They decreased their long holdings by 8,728 lots to hold 39,012 long positions and increased their short holdings by 3,598 lots to hold 8,933 short positions.

 

For KCBT wheat futures and options combined, speculators were long 36,628 lots, down 9,572 contracts, and short 7,456 contracts, up 3,707 lots from the previous week.

 

For MGE spring wheat futures only, speculators for the week ended Nov. 22 cut their net long position, decreasing long holdings by 1,115 lots to 8,620 lots and decreasing short holdings by 33 lots to 51 lots.

 

For MGE spring wheat futures and options combined, speculators also cut their net long stance, decreasing long holdings by 1,168 lots to 8,469 contracts and cutting short holdings by 99 lots to 51 contracts.