December 11, 2006

 

US Wheat Outlook on Monday: Up 1-2 cents on overnight, USDA seen neutral

 

 

U.S. wheat futures are expected to start Monday's day session steady to higher on firmer overnight trade and with some possible bearish influence from increased ending stocks estimates, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 1-2 cents firmer.

 

In e-CBOT overnight trade, March wheat was up 3 1/4 cents at US$4.89 per bushel.

 

The U.S. Department of Agriculture on Monday morning raised its forecast for 2006-07 U.S. wheat ending stocks from 418 million bushels in November to 438 million bushels. Analysts had largely expected the increase, they said.

 

The USDA also hiked its global forecast for wheat production to 588.56 million metric tonnes, a 1.75-million-tonne increase from a month ago, because of stronger-than-expected production in countries including Argentina and Canada.

 

The USDA decreased its U.S. export estimate from 925 million in November to 900 million.

 

The adjustments are bearish for wheat prices, CBOT floor sources said, although traders might shrug off the report because the changes were widely expected, sources said.

 

"We'll probably open higher at first off the overnight," a CBOT floor source said.

 

CBOT March wheat prices Friday closed lower, near the session low, at the weekly low close and hit a fresh three-week low, a technical analyst noted. The bears have downside technical momentum at CBOT heading into the new trading week, he said.

 

The next downside price objective for the bears is closing CBOT March wheat prices below support at US$4.70 a bushel, which is the bottom boundary of the downtrend channel. 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 Friday's high of US$4.94 and then at US$5.00. First support lies at Friday's low of US$4.85 and then at US$4.80, he said.

 

Some support for prices could come from news that Egypt over the weekend bought 60,000 tonnes of U.S. soft white wheat and 55,000 tonnes of U.S. soft red wheat, an analyst noted. Egypt also bought 60,000 tonnes of French wheat, 30,000 tonnes of Russian wheat and 55,000 tonnes of Argentine wheat, an official said.

 

Iraq, meanwhile, said it will soon issue tenders to buy large quantities of wheat from foreign suppliers for delivery in 2007, the head of the Grain Board of Iraq said Monday. The amounts purchased will be much more than 100,000 metric tonnes of wheat, the said.

 

The official denied reports the board has issued recently a tender to buy 100,000 tonnes of wheat. Some news reports said the closing date for the tender was Dec. 9.

 

Looking at the weather, near- to above-normal temperatures and mostly below-normal rainfall during the next 10 days will deplete soil moisture for the wheat crop and increase crop stress, especially in the U.S.'s western areas, the DTN Meteorlogix weather firm said.

 

In the eastern Midwest, warm temperatures and some rainfall favors wheat, the firm said. However, the conditions may leave the wheat more susceptible to damage in the event of a turn to much colder weather, Meteorlogix added.

 

In Chinese wheat-growing areas, crops continue to enter dormancy under a colder than normal pattern, the firm reported.

 

China's wheat prices remained stable in the week to Monday in most regions, as state auctions helped alleviate tight supply, but analysts said more scheduled auctions are raising the risks of downside for the near future.

 

In Argentina, some hot weather and shower activity is expected during the next five days, the firm said.

 

In other news, the E.U. produced 5.6% less soft wheat in 2006-07 compared with the previous season, according to estimates released Monday by a farm lobby group. The group pegs E.U. soft wheat output at 108.4 million metric tonnes, up slightly from its previous forecast of 108.1 million tonnes issued in September.

 

Durum wheat production was estimated at 8.7 million tonnes, down from the group's previous figure of 9.1 million tonnes, but which is up 8.3% from the 2005-06 crop.

 

Ukraine, meanwhile, exported 2.2 million tonnes of wheat from July to November, compared with 3.4 million tonnes a year ago, the state customs authorities reported Monday. In November, 170,000 tonnes of wheat was exported, down from 389,000 tonnes in October.