April 28, 2006

 

US Wheat Outlook on Friday: Down 2 cents on US HRW rain, follow-through

 

 

U.S. wheat futures were called to open down 2 cents Friday following weak overnight trade on ideas that rains across the U.S. Southern Plains into the weekend will aid the rapidly maturing hard red winter wheat crop, brokers said.

 

Rains of 0.30 to 1.50 inches should fall Friday and into Saturday, favoring the southern and eastern U.S. HRW wheat belt, according to DTN Weather.

 

"When you take away the supply bull aspects of it, the market falls on its own weight because of demand," said John Kleist, of Kleist Ag Consulting. "Demand isn't that good. As a consequence, we live or die on the rain."

 

First notice day deliveries Friday against CBOT May wheat futures, at 1,357 lots, met expectations and not seen influencing wheat futures prices Friday, Kleist said. Stoppers included a customer of Bear Stearns at 424 lots and a customer of Calyon Financial at 300 lots.

 

There were no deliveries posted against Kansas City Board of Trade May or Minneapolis Grain Exchange May wheat futures on Friday's first notice day.

 

In the overnight e-CBOT session, most-active July wheat closed down 1/4 cent at US$3.55 1/2. Prices of CBOT July wheat Thursday closed near the session low and hit a fresh three-week low on weather forecasts for good rains in the Plains.

 

"Bears gained some fresh downside technical momentum and a close below the March low of US$3.51 would provide the bears with some better downside technical momentum," a technical source said. "It will take a close back above resistance at US$3.70 to provide the bulls with some fresh upside technical momentum."

 

First resistance for CBOT July wheat was seen at US$3.60 3/4--Thursday's high--and then at US$3.65. First support was put at US$3.53--Thursday's low--and then at US$3.51.

 

KCBT July wheat ended overnight down 3 cents at US$4.28 3/4 per bushel.

 

"Look for higher volatility in the near term, which is typical for serious weather markets in grains," the technical source said. "It will take a close above this week's high of US$4.58 to provide the bulls with some fresh upside technical momentum. A weekly low close on Friday would provide the bears with better downside technical momentum."

 

First resistance for KCBT July wheat was seen at US$4.39--Thursday's high--and then at US$4.45 1/2. First support was seen at US$4.30 1/2--Thursday's low--and then at US$4.25.

 

Cash U.S. hard red winter wheat basis bids were mixed Friday, with a 5-cent loss in the Texas Gulf; soft red winter wheat basis bids were also mixed, with a 10-cent loss in the Kansas City truck market; and spring wheat basis bids were mostly steady to weak, with a 1-cent loss in Portland, Ore., grain merchandisers said.

 

U.S. wheat export news was quiet.

 

In global wheat news, India is considering a cut in wheat import duties for direct users, such as flour mills and biscuit manufacturers, India's Food Minister Sharad Pawar said Friday.

 

India recently received its first cargo of wheat imports in six years as it faces short supplies.

 

The U.S. Department of Agriculture's attach¨¦ in India this week forecast India would import about 4 million tonnes of wheat during 2006 due to the shortages.

 

The Canadian Wheat Board raised prices of wheat sold in the 2006-07 crop year by CUS$1.00 per metric tonne on most classes, citing volatile currency and commodity markets.

 

The bearish impact of the strong Canadian dollar on wheat returns in Canada has been countered by crop-production problems in the U.S. hard red winter wheat region, sources said.

 

The CWB lowered its expected returns for durum by CUS$1.00 per tonne on most classes, citing the strong Canadian dollar and large global durum stocks that will be carried into 2006-07.

 

However, uncertainty regarding new-crop production in the Mediterranean and projections for lower planted area in Canada and the U.S. have helped provide some support for durum values, said the CWB.