December 18, 2006

 

US Wheat Outlook on Monday: 2-4 cents down on overnight, consolidation

 

 

U.S. wheat futures are expected to start Monday's day session lower on weaker overnight trade and a continued consolidation trend going into the end of the year, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 2 to 4 cents lower per bushel.

 

In e-cbot overnight electronic trade, CBOT March wheat was down 4 cents at US$4.90 1/4.

 

Consolidation before the Christmas holiday and end-of-the-year liquidation will likely show up early in the session, a CBOT floor trader noted. There also may be some position-evening later to make for choppy trade in thin-volume action, he said.

 

Short-covering pulled U.S. wheat to a higher close Friday, and bulls now have some fresh upside technical momentum at CBOT, a technical analyst said. He added that CBOT March wheat is still in a well-defined two-month-old down-trending channel on the daily bar chart.

 

The next downside price objective for the bears is closing prices below support at last week's low of US$4.78 1/2, he said. The bulls' next upside price objective is to close prices above solid resistance at US$5.00.

 

First resistance is seen at last week's high of US$4.96 and then at US$5.00. First support lies at Friday's low of US$4.86 and then at US$4.78 1/2, he said.

 

There was little news out over the weekend to direct market movements, sources said.

 

The Commodity Futures Trading Commission said funds were net long 23,241 contracts at CBOT in the week ended Dec. 12. Funds cut long positions by 11,413 contracts and increased shorts b 1,436 contracts.

 

At KCBT, funds were net long 31,698 contracts. Funds decreased long positions by 5,312 contracts and short positions by 62 contracts.

 

At MGE, funds increased long positions by 379 contracts and cut shorts by 103. Funds were net long 12,045 contracts.

 

Looking at the weather, a major storm system will impact the U.S. Southern Plains on Tuesday and Wednesday, producing some very beneficial precipitation for most of the winter wheat belt, the DTN Meteorlogix weather firm reported.

 

In the eastern Midwest, showers and some rain this week will maintain soil moisture for wheat, the firm said.

 

In Argentina, heavy rains that fell during the weekend should help maintain soil moisture for crops, but there may have been some flooding with these storms, Meteorlogix noted.

 

Argentine farmers have brought in over half of the 2006-07 wheat crop, the Agriculture Secretariat said in its weekly crop report Friday. Yields are mixed in some areas due to early drought but crop conditions are generally good, the Secretariat said.

 

As of Thursday, farmers had brought in 51% of the 2006-07 wheat crop, compared to 46% at this time last year, according to the Secretariat. The Secretariat forecasts 2006-07 wheat production at 13.6 million tonnes, while the U.S. Department of Agriculture's latest forecast for Argentina is 14.2 million tonnes.

 

In China, temperatures were cold during the weekend but probably not cold enough to harm dormant winter grains, the firm said.

 

China's wheat prices held largely stable last week, with supply and demand in balance, analysts said Monday. Average quality wheat in major producing regions was quoted at almost the same price as a week earlier.

 

In other news, the Australian Bureau of Agricultural and Resource Economics forecast Australia's wheat exports this fiscal year at 12.79 million metric tonnes, compared with exports of 15.17 million tonnes last fiscal year. A severe drought hurt production, the bureau said.

 

Production will decline to 9.7 million tonnes this fiscal year from 25.1 million tonnes previously, the bureau added. Still, a drawdown from stocks will help meet export demand and higher world prices will help moderate a fall in the value of exports, according to the bureau.

 

Concerns about Australian exports are old news now and should not affect trading, a CBOT floor source noted.

 

Russia, meanwhile, exported just more than 6 million metric tonnes of grain from the beginning of the current marketing year July 1 to Nov. 30, sources said. That is down from over 7 million tonnes in the corresponding year-earlier period, they said.

 

The grain exported this year included 5.4 million tonnes of wheat, down from nearly 6 million tonnes of wheat a year ago.