December 9, 2005

 

US Wheat Outlook on Friday: Down 2-3 cents on USDA global wheat data

 

 

U.S. wheat futures were called to open down 2-3 cents per bushel on bearish U.S. Department of Agriculture domestic ending stocks and global wheat data, brokers said.

 

"The global wheat production going up 4-5 million metric tonnes is big, and respectively, (global wheat end) stocks go up as well," said Terry Reilly, a grain analyst at Citigroup in Chicago.

 

The USDA Friday raised its global 2005-06 wheat production estimate to 615.33 million metric tonnes from last month's estimate of 610.58 million. Subsequently, global 2005-06 wheat ending stocks were raised to 143.4 million metric tonnes from last month's estimate of 139.5 million.

 

The gains followed increased production numbers for Australia (up 1.5 million to 24 million metric tonnes); Canada (up 1.3 million to 26.8 million); and China (up 1 million to 96 million).

 

Consequently, China's wheat imports were expected to drop 0.5 million tonnes to 2 million, well below last year's imports of 6.75 million tonnes, the USDA said.

 

CBOT wheat traders have noted that the lack of Chinese purchases of U.S. soft red winter wheat this year, along with good U.S. production, have pressured CBOT prices.

 

Still, overall global wheat imports were raised from the USDA November estimate. The new global import forecast is 107.36 million tonnes, up from the 107.06 million predicted last month.

 

The USDA left unchanged its 2005-06 Argentine, Russian and Indian crop production estimates, slightly lowered its European Union estimate (to 122.52 million tonnes from last month's 122.67 million); and slightly raised its FSU-12 estimate to 92.86 million metric tonnes from last month's 91.56 million.

 

On the U.S. balance sheet, the USDA left unchanged its 2005-06 wheat ending stocks estimate at 530 million bushels.

 

The government only slightly altered its U.S. wheat class balance sheets, cutting U.S. hard red winter wheat stocks by 2 million bushels to 173 million and raising hard red spring ending stocks by 2 million to 121 million.

 

On the export front, the USDA boosted its U.S. HRW export estimate by 5 million bushels to 444 million and cut its durum wheat export estimate by 5 million to 30 million, leaving total U.S. 2005-06 wheat exports unchanged at 1 billion bushels.

 

In the overnight e-CBOT session, most-active March wheat at the Chicago Board of Trade closed down 1/4 cent at US$3.12 per bushel.

 

First resistance for CBOT March wheat was seen at US$3.15--Thursday's high--and then at US$3.18. First support lies at US$3.09 1/2--Thursday's contract low--and then at US$3.05, a technical analyst said.

 

There were 328 deliveries posted against CBOT December wheat on Friday, with Banc of America Securities stopping 139 lots and ABN Amro stopping 189 lots.

 

There were 2 redeliveries posted Friday against Kansas City Board of Trade December wheat and no deliveries posted against Minneapolis Grain Exchange December wheat.

 

Cash U.S. hard red winter wheat basis bids were mostly steady to narrowly mixed Friday; soft red winter wheat basis bids were steady to weak, with a 9-cent drop in St. Louis and a 5-cent drop in Chicago; and spring wheat basis bids were steady to weak, with a 15-cent drop in Minneapolis rail bids and a 6-cent drop in Portland, Ore., grain merchandisers said.

 

Traders continued to eye reports from the U.S. Southern Plains HRW belt as bitter temperatures this week have raised fears of crop damage. Meteorologists said dry conditions would linger across the droughty southern HRW belt for the next seven days while forecasts called for warmer weekend temperatures.

 

The U.S. SRW wheat crop is generally in much better shape after a wetter autumn.

 

In overnight U.S. wheat export news, South Korea bought 22,000 metric tonnes of U.S. wheat while the USDA's CCC bought 4,890 metric tonnes of northern spring wheat for Nicaragua.

 

In global wheat news, India said in a mid-year economic review that its wheat stocks are adequate to meet the country's requirements till the next marketing year starting April 2006.

 

Government food grain stocks as of Nov. 1 totaled 19.39 million metric tonnes, comprising 10.34 million tonnes of rice and 9.05 million tonnes of wheat, the review said.

 

"Though the stocks are marginally below the buffer stocking norm...it is important to bear in mind that wheat stocks are normally expected to go down between Oct. 1 and Jan. 1," the report said.

 

U.S. wheat traders have speculated that India will need to import wheat due to low stocks before its crop year ends March 31.