September 11, 2009

 

US Wheat Outlook on Friday: Seen down after USDA raises world supply

 

 

U.S. wheat futures are called to open slightly lower Friday after the government issued crop data that failed to shock the markets but reconfirmed large global supplies, analysts said.

 

Chicago Board of Trade December wheat is called to open 1 to 2 cents per bushel lower. In overnight electronic trading, CBOT December wheat rose 2 3/4 cents to US$4.61 1/2.

 

The U.S. Department of Agriculture estimated U.S. wheat ending stocks for 2009-10 at 743 million bushels, unchanged from its August estimate but below the average analyst estimate of 769 million. Some analysts had expected carryout to expand due to the sluggish pace of export demand.

 

Still, it was not too surprising to see carryout stay unchanged because the USDA is due to issue a small grains report at the end of the month, traders said.

 

The USDA raised its estimate for world wheat ending stocks for 2009-10 to 186.61 million tonnes from its August estimate of 183.56 million. The increase affirmed perceptions about ample global wheat supplies, an analyst said.

 

Wheat "received the worst of the USDA data," according to a market comment from Global Commodity Analytics & Consulting. "Even though the U.S. carryover stayed the same and total demand was unchanged vs. last month, the world numbers jumped another 1.6% vs. last month."

 

The USDA kept its forecast for Australia's wheat crop unchanged at 23 million tonnes. Traders have been keeping an eye on Australia due to the threat of a drought caused by El Nino.

 

Despite beneficial rains a week ago, jointing-to-reproductive wheat in Australia's New South Wales and Queensland still needs rain to reverse a recent drying trend, private weather firm DTN Meteorlogix said. The region looks to be mostly dry for the next seven to eight days.

 

In Argentina, the southern wheat belt looks to continue mainly dry during the next seven days, Meteorlogix said. Northern wheat areas may see rain or thunderstorms later Tuesday or early Wednesday, but dryness is still a "significant concern," the firm said.

 

The USDA cut its forecast for Argentina's crop to 8 million tonnes from its August estimate of 8.5 million.

 

In other news, weekly U.S. wheat export inspections of 636,400 tonnes were above trade estimates, which ranged from 300,000 tonnes to 500,000 tonnes.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.25, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at last week's high of US$5.02, he said.

 

First resistance is seen at US$4.63 3/4 and then this week's high of at US$4.75 3/4. First support lies at the contract low of US$4.52 3/4 and then at US$4.50, he said.