December 19, 2006

 

US Wheat Outlook on Tuesday: Down 1-2 cents on overnight, slow news front

 

 

U.S. wheat futures are expected to start Tuesday's day session slightly weaker on momentum from lower overnight trade and a lack of fresh bullish news, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 1 to 2 cents per bushel lower.

 

In e-CBOT electronic trade, March wheat was down 2 cents at US$4.85 1/2.

 

There was little fresh news out overnight to spark a rally during the day session, and ongoing end-of-the-year consolidation is possible, sources noted. Trading is expected to be thin and choppy with some position-evening, they said.

 

"We're in that holiday mode," a CBOT floor trader said. "There's not a lot of trading interest."

 

CBOT corn and soybeans futures were modestly firmer overnight and may offer some spillover strength to wheat, an analyst said.

 

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

 

First resistance is seen at US$4.90 and then at last week's high of US$4.96, he said. First support lies at Monday's low of US$4.81 1/2 and then at US$4.78 1/2.

 

No fresh price support is expected from news that Japan is seeking 140,000 metric tonnes of wheat in a tender to be concluded Thursday for shipment Jan. 16-Feb. 15, the CBOT floor trader noted. The tender is routine, he said.

 

It includes 38,000 tonnes each of U.S. hard red winter wheat and U.S. dark northern spring wheat and 14,000 tonnes of U.S. western white wheat.

 

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

 

In the eastern Midwest, showers and rain this week will maintain soil moisture for wheat, Meteorlogix said. No significant cold weather is in sight for this region, the report added.

 

In China, seasonal temperatures and dry conditions will mainly favor dormant wheat, Meteorlogix said.

 

India has seen a recent increase in temperature, although it is unlikely to hurt the winter planting of wheat crops, the agriculture minister said. Over the last two years, India has been losing about 4 million tonnes of wheat each year because of higher-than-normal temperatures in winter, which shrivels the grain.

 

In Argentina, periodic rains will maintain soil moisture for wheat crops, but there may be some flooding, Meteorlogix said.

 

Ukraine, meanwhile, cut its export forecast in the 2006-2007 marketing year to 8 million tonnes of grain, down from the 9.45 million tonnes forecast earlier, because of a smaller-than-expected harvest. By Dec. 15, Ukraine had exported 5.4 million tonnes of grain harvested this year, including 2.3 million tonnes of wheat.

 

Ukraine's wheat harvest this year was 13.994 million metric tonnes, 4.765 million tonnes less than last year, according to new state statistics. The total grain harvest was 34.1 million tonnes, 3.66 million tonnes lower than in 2005.

 

Wheat stocks in Ukraine to date totaled 5.5 million tonnes, a fall of 20% over last year.

 

U.K. wheat exports for October totaled 151,728 tonnes, down from 258,088 tonnes one month earlier, the U.K. Home-Grown Cereals Authority said. On the month, shipments to Ireland, France, Germany, Portugal and Spain were all down, although Spain was the largest destination for U.K. wheat at 96,119 tonnes. After a very slow start, U.K. wheat exports in the first quarter of the 2006-07 marketing year, which runs from July to June, are running 18% behind last year's pace at 599,717 tonnes, officials said.