July 3, 2006

 

US Wheat Outlook on Monday: 4-6 cents higher on HRS crop stress

 

 

Traders and analysts expect U.S. wheat futures to open 4 to 6 cents a bushel higher Monday on hot, dry conditions further stressing the northern Plains hard red spring crop.

 

In overnight trade basis September contracts, Chicago Board of Trade wheat was 4 1/4 cents higher at US$4.00 1/4, Minneapolis Grain Exchange September was 6 1/2 cents higher at US$4.99 1/2 and Kansas City Board of Trade was up 4 cents to US$5.13 a bushel.

 

Mostly dry conditions and temperatures as high as 98 Fahrenheit were seen over the weekend in the northern Plains, and that forecast is expected to continue through much of the week. A few light showers are possible on Friday, though readings are seen above to much above normal, the DTN Meteorlogix weather service said.

 

The HRS crop has deteriorated over the last two weeks and market participants expect crop condition numbers to decline further when the U.S. Department of Agriculture issues is weekly crop progress/condition report Monday at 4 p.m. EDT. South Dakota is being hit the worst by drought.

 

Meanwhile, deliveries posted against CBOT July wheat totaled 972 contracts. ABN Amro stopped 350, Dowd Wescott stopped 298 and Tenco stopped 215 of those.

 

At the KCBT, 823 deliveries were posted and stoppers were scattered. Man Financial stopped 407, Frontier Futures stopped 180, J.P. Morgan stopped 109 and Shay Grain stopped 79, the exchange reported.

 

At the MGE, 62 notices were posted, and Country Hedging stopped 49 and Goldenberg Hehmeyer stopped 13 of them.

 

In other news, Australian exporter AWB raised its estimate of returns from pooled export sales of new-crop wheat following strengthening world cash markets. Premium white wheat of 10.5% protein will return AUS$223 a metric tonne, free on board, up AUS$4 from two weeks ago. Prime hard wheat of 13% protein rose US$6 to AUS$251 a tonne, while 13% protein durum rose AUS$5 to AUS$230 a tonne.

 

Concerns over hot, dry conditions in the U.S. have bolstered wheat prices.

 

Australia's southwest wheat belt saw its driest June on record, and June is normally one of the two wettest months of the year. The winter wheat and barley crops rely on those rains to build moisture levels ahead of harvest in December.

 

Jordan bought 100,000 tonnes of Syrian wheat Monday for US$142 a tonne.

 

China's wheat prices were little changed last week as state warehouses continued to buy from farmers at government-set minimum prices. Most wheat prices were quoted at RMB1,380-RMB1,440 a tonne.

 

China's wheat production is expected to increase to 103.1 million tonnes, up 5.8% from 2005, on growing area that increased by 2.1% to 23.27 million acres.

 

Technically, bulls still have slight momentum in CBOT December wheat, but it will take a close above US$4.23 resistance to strengthen that momentum and provide a restest of the highs. First resistance is at US$4.19, then US$4.23. Support is found at US$4.10 1/2 and US$4.05.