December 22, 2005

 

US Wheat Outlook on Thursday: Steady to 2 cents higher

  

 

Wheat futures are called to open steady to firmer Thursday, supported by overnight strength and ideas short covering could lift trade.

 

Benchmark Chicago Board of Trade March wheat is seen starting steady to 2 cents higher.

 

In e-cbot trade, March wheat was up 1 1/2 cents to US$3.29 a bushel.

 

Analysts are keeping an eye on the CBOT-Kansas City Board of Trade spreads, which feature a short CBOT-long KCBT position. If those spreads unwind, CBOT wheat could push higher, said Sid Love, of Joe Kropf/Sid Love Consulting.

 

Support for wheat might also come from any strength in neighboring corn and soybean futures, along with positioning-evening ahead of the holidays. Because of a large fund short position, the evening up of positions will likely be short covering.

 

The U.S. Department of Agriculture said wheat export sales were 522,700 metric tonnes, 27% below the previous week, but 14% over the prior 4-week average. Trade estimates ranged from 400,000 to 600,000 tonnes. The biggest buyers were Nigeria, which bought 85,900 tonnes; and Japan, which bought 82,600 tonnes. Other buyers of note included China, Mexico, Thailand and Venezuela. This could lend modest support.

 

After Wednesday's inside trading day on day-only technical charts, wheat futures are looking for direction. Since making a low at US$3.07 in early December March wheat's momentum is to the upside. Depending on fund interest, that bounce could continue.

 

"We do have the strength in other commodities - crude oil, gold, silver and grains are cheap," so that could attract year-end buying, Love said.

 

Private weather firm DTN Meteorlogix said there are no significant cold weather threats to the wheat crop in the southern Plains during the next seven days. Further, there is no significant chance for rain during this time, except there is a slight chance in north Texas Dec 27 or 28 for some rainfall.

 

In Asian news, Japan's Ministry of Agriculture, Forestry and Fisheries bought 110,000 metric tonnes of wheat for January-February shipment. No details are available about the grades or prices of wheat. The U.S. garnered 70,000 tonnes while Australia and Canada each won 20,000 tonnes.

 

Grain trading companies China National Cereals, Oils & Foodstuffs Corp., or COFCO, and China Grains & Oils Group Corp. are in merger talks, the head of the government agency that oversees China's large state-owned companies said Thursday. The official would not disclose further details.

 

China's total grain output this year is expected to exceed 480 million metric tonnes, with yield likely to hit a record 4.628 tonnes a hectare, the official Xinhua New Agency reported late Wednesday, citing a senior agriculture official. No breakdown on type or grain was provided.

 

The Australian government's Bureau of Meteorology said there's a low chance an El Nino weather event will develop in the Pacific Ocean in coming months, although its opposite - La Nina - might develop.

 

The temperature of the central to eastern Pacific Ocean has continued to cool in the past three weeks, while the full range of indicators shows a neutral situation is persisting, the bureau reported. If the cooling persists there's a slight chance it could lead to a La Nina, they said.