December 14, 2006

 

US Wheat Outlook on Thursday: Steady opening on exports, overnight

 

 

U.S. wheat futures are expected to start Thursday's day session steady with support from strong weekly export sales figures and pressure from overnight losses, sources said.

 

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

 

In e-cbot overnight trade, CBOT March wheat was 1 1/2 cents lower at US$4.87 a bushel.

 

Weekly U.S. wheat export sales were 471,100 metric tonnes for the week ended Dec. 7, 17% above the previous week and 15% over the prior 4-week average, the U.S. Department of Agriculture reported. The sales were on the high end of analysts' expectations of 300,000 tonnes to 500,000 tonnes.

 

Major increases were reported for Nigeria, which took 90,500 tonnes, Guatemala, which bought 85,700 tonnes, and Japan, which bought 78,200 tonnes, according to the USDA.

 

The weekly sales are "solid," although year-to-date business is still down notably over last year, a CBOT floor source said.

 

Aside from the export sales figures, there was little other major, market-moving news out, sources said.

 

The Ukrainian government has imposed a new quota of 1.106 million metric tonnes on the export of grain until the end of the current marketing year on June 30, 2007, and canceled a previously announced quota of 1.603 million tonnes, according to reports. The new quota includes 3,000 tonnes of wheat, the reports stated.

 

Because of the restrictions imposed by the government on grain exports, Ukraine's grain export between the beginning of the current marketing year July 1 and Nov. 30 totaled 5.3 million metric tonnes, 12% less than in the corresponding period last year. The export of wheat in July-November totaled 2.2 million tonnes, compared with 3.4 million tonnes a year ago.

 

"No matter what, they're having a hard time getting wheat out of there," a source said about the Black Sea region. "I think the market already knows that."

 

Looking at the weather, no significant precipitation or cold weather is forecast in the U.S. Southern Plains for the next five days, the DTN Meteorlogix weather firm reported.

 

Warm temperatures and some rainfall favors wheat in the eastern Midwest during the next five days, Meteorlogix said. However, this may leave the wheat more susceptible to damage in the event of a turn to much colder weather, the firm noted.

 

In Argentina, there are no significant concerns for crops as some hot weather and shower activity are seen during the next five days, Meteorlogix said.

 

In China, colder weather is seen for the next three to four days, although it doesn't look to be cold enough to harm dormant winter wheat, the firm said.

 

China sold a total of 832,800 metric tonnes of wheat through public auctions Thursday at prices slightly lower than the cash values, sources said. A total of 1 million tonnes of wheat was planned to be sold through the auctions.

 

The wheat was bought by the government warehouses at minimum purchase prices earlier this year. The government directed state-owned warehouses in six major wheat growing provinces to buy wheat at the minimum prices to help protect farmers' incomes.

 

In other news, ending stocks of 2006-07 Canadian wheat are now pegged at 8.1 million metric tonnes, up from a Nov. 10 forecast of 7.3 million tonnes, according to the latest supply-demand tables from Agriculture and Agri-Food Canada market analysis branch. The adjustment was primarily a result of recent upward revisions to production estimates for the 2006 crop made by Statistics Canada.

 

CBOT March wheat prices Wednesday closed near the session high on short covering and speculative buying, sources said. There may be more bargain buying in Thursday's day session, the CBOT floor trader noted.

 

Still, bears have some downside technical momentum on their side at CBOT, a technical analyst said.

 

The next downside price objective for the bears is closing CBOT March wheat prices below support at US$4.65. The bulls' next upside price objective is to close prices above solid resistance at US$5.00, the analyst said.

 

First resistance is seen at this week's high of US$4.92 1/2 and then at US$5.00. First support lies at Wednesday's low of US$4.78 1/2 and then at US$4.75, he said.