August 25, 2006

 

US Wheat Outlook on Friday: Down 1-2 cents; positioning, choppy trade expected

 

 

U.S. wheat futures are seen starting Friday's day session lower, in tune with overnight action, pressured by end of the week positioning following recent gains.

 

In overnight electronic trading, Chicago Board of Trade September wheat was 2 cents lower at US$3.73 1/2 and CBOT December wheat was 2 cents lower at US$3.93 3/4.

 

End of the week profit taking is expected to provide pressure to prices initially, with a quiet news front and a lack of surprises in Friday's Stats Canada production report failing to provide a directive influence, said Shawn McCambridge, senior grains analyst with Prudential Financial in Chicago.

 

However, analysts anticipate choppy, two-sided action to emerge after opening pressure is absorbed, as the market is seemingly building a supportive demand base amid talk of a tightening world wheat balance sheet and technical strength.

 

Crop losses in Europe may be a little more sever than thought and with uncertainty surrounding Australia and Argentina's crops, supply and quality may be key issues for the market, McCambridge added.

 

A market technician said a weekly high close on Friday as well as a close back above psychological resistance at US$4.00 would provide December CBOT wheat with fresh upside technical momentum. The next downside price objective is closing prices below solid support at last week's low of US$3.76 3/4 a bushel.

 

First resistance is seen at US$3.96 - Thursday's high - and then at US$4.00. First support lies at US$3.90 and then at US$3.88 1/2 - Thursday's low.

 

The technician said December KCBT wheat saw a bullish upside breakout from a recent sideways trading range Thursday. The next near-term upside price objective is closing prices back above solid resistance at US$4.80. The next downside objective is closing prices below solid support at last week's low of US$4.54.

 

First resistance is seen at Thursday's high of US$4.76 and then at US$4.80. First support is seen at US$4.68 - Thursday's low - and then at US$4.63.

 

StatsCanada estimated Canada's all wheat production at 25.925 million metric tonnes. The figure came in near the high of estimates that ranges from 24.0 to 26.0 million metric tonnes. The spring wheat crop was estimated at 19.03 million tonnes, a 1.3%increase from 2005.

 

The DTN Meteorlogix Weather Service forecast said widespread thunderstorm activity is expected Friday through Sunday will help to recharge soil moisture for fall planting in the U.S. southern plains. The best chance for significant rain appears to be from the Texas Panhandle and north Oklahoma northward through Kansas.

 

In Australia, dryness is of increasing concern for important growing areas of New South Wales and southern Queensland. A disturbance in the region early next week may lead to showers in the east part of this region. In Argentina, any shower activity during the next 7 days looks to be light. Rainfall is needed to support favorable early spring development. This also appears to be a cold pattern with additional chances for frost or freezing weather during the 10-day period.

 

In global wheat news, India's federal government plans to soon issue another tender to import wheat through one of its state-owned agencies as part of a project to purchase 2 million metric tonnes by April 2007, of which 330,000 tonnes were purchased last month, a senior commerce ministry official said Friday.

 

India's federal government plans to allow provinces to exercise greater control over domestic trade in wheat and pulses to keep a check on local prices, a senior government official said Friday. Currently, provinces have to seek permission from the federal government before imposing restrictions, such as those on volumes held by a trader for a specific time period.

 

Australia won't make any major changes to a wheat export monopoly operated by AWB Ltd. (AWB.AU) while growers in the U.S. or Europe enjoy significant production or export subsidies, Trade Minister Mark Vaile said Friday.

 

Japan's Ministry of Agriculture, Forestry and Fisheries has bought 90,000 metric tonnes of wheat in a tender concluded Thursday, an agriculture ministry official said Friday.