August 2, 2007

 

US Wheat Outlook on Thursday: 8-10 Cents higher on 'explosive' exports

 

 

Stronger-than-expected weekly export sales should catapult U.S. wheat futures 8-10 cents higher per bushel at the start of Thursday's day session, floor traders said.

 

In e-cbot overnight trading, Chicago Board of Trade September wheat rose 8 1/4 cents to US$6.44 1/4, and CBOT December wheat ended up 7 1/4 cents at US$6.57.

 

The U.S. Department of Agriculture said export sales for the week ended July 26 were 1.74 million metric tonnes, 53% above the prior four-week average. Trade estimates called for sales of 450,000 to 1.2 million tonnes.

 

Major buyers included the Philippines, which took 241,000 tonnes; Iraq, which bought 200,000 tonnes; and Morocco, which bought 111,900 tonnes. Unknown destinations bought 447,700 tonnes.

 

The USDA also reported higher-than-expected sales a week ago. For the week ended July 19, export sales totaled 2.08 million metric tonnes, the highest since June 1996, according to the agency.

 

Some traders thought the big sales report last week would be a "one hit wonder" and not be repeated this week, a CBOT floor broker said.

 

"Obviously, that wasn't the case," he said. "These sales are explosive."

 

The fact that exports have remained strong despite historically high U.S. wheat futures prices is bullish and reflects concerns about tight global supplies. Still, U.S. sales are proceeding at an "unsustainable pace" and have to drop off sometime, a CBOT floor trader said.

 

World ending stocks are pegged at the lowest level since 1981-82. Unfavorable weather, meanwhile, is causing production problems in key crop areas, including Europe and the Black Sea region.

 

Severe drought has nearly halved Romania's wheat crop to around 3 million metric tonnes in 2007, raising the prospect that the country may have to resort to imports and hike bread prices, news agency Mediafax reported Thursday, citing agriculture ministry data. The newest member of the European Union saw its wheat crop reaped on 99% of the sown area drop 44% from the 5.3 million metric tonnes it harvested in 2006.

 

In Western Europe, some significant rains could develop early next week, disrupting the remaining harvest, according to DTN Meteorlogix. Some light showers have occurred during the past 24 hours, the weather firm said.

 

Spring wheat grown in the U.S. Northern Plains and Canadian prairies should see near to above-normal temperatures with only scattered light showers during the next seven days, Meteorlogix said. That will favor the maturing crop and the harvest.

 

Hot weather in western areas in July damaged heading and filling wheat. This hot, dry weather also damaged the crop in southern Alberta and southwest Saskatchewan with some further damage possible during the next seven days, Meteorlogix said.

 

In other export news, Japan said it bought a total of 146,000 tonnes of wheat in a routine tender concluded Thursday. A shipment of 66,000 tonnes, all of U.S. origin, is expected to arrive Sept. 1-Oct. 5. A second shipment of 80,000 tonnes, including 20,000 tonnes from the U.S., is expected to arrive Oct. 1-31.

 

Separately, Japan said it is seeking 30,500 tonnes of food wheat in a simultaneous buy-sell, or SBS, tender to be concluded on Aug. 23. Under the SBS system, the ministry floats periodic tenders that simultaneously identify the price at which the ministry can buy a product from an importer and the price at which it can sell the product to an end-user.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at the contract high of US$6.78, a technical analyst said. The next downside price objective for the bears is closing prices below strong support at US$6.38 1/2, which would fill on the downside an upside price gap created on the daily bar chart.

 

First resistance is seen at Wednesday's high of US$6.58 and then at US$6.65. First support lies at US$6.50 and then at US$6.45.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above solid resistance at the contract high of US$6.68 1/2, the technical analyst said. The bears' next downside objective is closing prices below solid support at US$6.26, which would fill on the downside an upside price gap on the daily chart.

 

First resistance is seen at US$6.50 and then at this week's high of US$6.59. First support is seen at US$6.39 and then at Wednesday's low of US$6.33.

 

CBOT corn and soybeans also are expected to start higher Thursday, which should lend spillover strength to wheat futures, a floor trader said.