April 26, 2006

 

US Wheat Outlook on Wednesday: Up 1 cent on US hard wheat crop worries

 

 

U.S. wheat futures were called to open up 1 cent Wednesday, despite weak overnight trade, led by gains in Kansas City Board of Trade and Minneapolis Grain Exchange wheat on hard wheat crop development concerns, brokers said.

 

Reports of freezing temperatures overnight in Kansas, the top U.S. wheat producer, prompted fears of damage to early flowering wheat, some sources said. However, they noted any possible damage may take a few days to assess, they noted.

 

Meanwhile, concerns about delayed plantings in the Northern Plains spring wheat belt were seen supporting MGE spring wheat futures.

 

"The market is pretty well fixated on the weather and production implications," said Shawn McCambridge, a grain analyst at Prudential Financial.

 

"Upside potential will probably be limited if we're basing it just on the cold temperatures until we get a more accurate assessment of whether damage did actually take place," McCambridge said. "We've seen this wheat crop too many times - we've 'killed' it and it turns around and comes back stronger than ever."

 

He added that fresh overnight U.S. wheat export news would also provide some underlying support.

 

In overnight wheat export news, Egypt bought 115,000 tonnes of U.S. soft white wheat and 120,000 tonnes of French wheat Wednesday.

 

Egypt bought two cargoes of 60,000 tonnes each of French wheat from Glencore at US$137.47 a tonne, 60,000 tonnes of U.S. soft, white wheat from Louis Dreyfus at US$134.32/tonne, 55,000 tonnes of U.S. soft white wheat from Bordeaux at 137.89/tonne, Nomani Nomani, General Manager of GASC told Dow Jones Newswires.

 

In other export news, a group of South Korean flour mills are jointly seeking 21,000 metric tonnes of U.S. No.1 wheat in a tender to be concluded on Thursday, a trader in Seoul said Wednesday.

 

In the overnight e-CBOT session, most-active July wheat closed down up 1/2 cent at US$3.64 per bushel.

 

"It will take a close back above resistance at US$3.75 to provide the bulls with some fresh upside technical momentum," a technical source said. "Bulls do not want to see a close below last week's low of US$3.57 1/2. It would take a close below the March low of US$3.51 would produce serious chart damage to suggest another solid leg down in prices in the near term."

 

First resistance for CBOT July was seen at US$3.66--Tuesday's high - and then at US$3.70 - last week's high. First support was seen at US$3.60 3/4 - Tuesday's low - and then at US$3.57 1/2 - last week's low.

 

Kansas City Board of Trade July wheat ended overnight down 3 1/4 cents at US$4.47 1/2 after closing near the session high Tuesday.

 

"A bullish pennant pattern has formed on the daily bar chart," a technical source said. "It will take a close above last week's contract high of US$4.71 1/2 to provide the bulls with some fresh upside technical momentum. A close below support at US$4.37 would provide the bears with fresh downside technical momentum."

 

First resistance for KCBT July wheat was seen at US$4.55 and then at US$4.60. First support was seen at US$4.43 - Tuesday's low - and then at US$4.40 - this week's low.

 

Cash U.S. hard red winter wheat basis bids were steady to firm Wednesday; soft red winter wheat basis bids were mostly steady to up 6 cents in the Kansas City truck market; and U.S. hard spring wheat basis bids were steady to firm, with a 3-cent gain in the Minneapolis rail bid, grain merchandisers said.

 

In global wheat news, Ukraine will plant spring wheat on 591,900 hectares in 2006 and not on 614,500 hectares as was forecast previously, the agriculture ministry said Wednesday.

 

India is considering slightly relaxing quality norms for import of wheat, an official said Wednesday. The country plans to import 3.0 million metric tonnes of wheat in addition to the 500,000 tonnes already purchased from Australia's AWB Ltd. (AWB.AU).

 

The Indian federal government bought 8.2 million metric tonnes of wheat from farmers during the April 1-25 period, down from 11.7 million tonnes from last year, government data showed Wednesday. Sources said the lower purchases were evidence of a lack of available grain in the market.

 

In exchange news, the CBOT announced early Wednesday that it would begin simultaneous electronic and open outcry grain markets trading on Aug. 1.

 

Trading hours for the electronically traded agricultural contracts will be from 6:30 p.m. to 6:00 a.m. CDT, and the daytime hours will be from 9:30 a.m. to 1:15 p.m. CDT. It will trade on the e-cbot platform.

 

The contract specifications for the electronically-traded agricultural products will be the same as those traded in open outcry and will be fully fungible with the corresponding pit-traded contracts.