January 31, 2006

 

US Wheat Outlook on Tuesday:Steady-up 1 cent on texas crop, forecast, Iraq

 

 

U.S. wheat futures were called to open flat to up 1 cent on the deterioration in Texas' crop condition, and dry 6-10 day forecasts called for cooler temperatures across the southeastern U.S. hard red winter wheat belt, brokers said.

 

Key winter wheat grower Texas reported late Monday that 88% of its crop was in poor to very poor shape, a decline of 1 percentage point on the week, due to drought.

 

"The other issue on the demand side is that it appears we're going to compete with Australia on the upcoming Iraqi tender for 1 million tonnes of hard wheat," said Don Roose, of U.S. Commodities. "If it's a split, I think that would be a negative."

 

Australian monopoly wheat exporter AWB Ltd. (AWB.AU) said Tuesday it tendered to supply 1 million metric tonnes of wheat in the latest Iraqi tender. Bids were expected to be opened Wednesday.

 

AWB has completed or almost completed shipping about 650,000 tonnes of wheat in a tender won last year. The U.S. took over as dominant supplier to Iraq in 2005, when it won a contract to supply 1 million tonnes on an FOB basis.

 

US Commodities' Roose said that calls for a weak open in Chicago Board of Trade corn and soybean futures on wetter weather in South America's crop regions could also limit gains in U.S. wheat futures early Tuesday.

 

"U.S. soft wheat supplies are still burdensome, so (CBOT) soft wheat may follow corn if we come under pressure," he said.

 

Potential long-only index fund buying or end-of-the month short-covering in CBOT wheat, as speculative funds are thought to be net short about 12,000 lots, could also be supportive, but Roose noted that that type of buying was difficult to anticipate.

 

In the overnight e-CBOT session, most-active March wheat at the CBOT closed up 1/4 cent at $3.45 3/4 per bushel. First resistance is seen at $3.47 and then at $3.50.

 

First support for CBOT March was seen at $3.43 1/2 - Monday's low - and then at $3.40.

 

Cash U.S. hard red winter wheat basis bids were mostly flat early Tuesday; soft red winter wheat basis bids were steady to weak; and spring wheat basis bids were also steady to weak, grain merchandisers said.

 

In U.S. wheat export news, Japan sought 60,000 tonnes of U.S. wheat in an overall tender for 125,000 tonnes that will close Thursday, sources said.

 

U.S. wheat traders also continued to eye reports of extreme cold in eastern Europe, particularly Ukraine and Russia; and news of dry conditions in the United Kingdom.