September 18, 2006

 

US Wheat Outlook on Monday: Up on e-CBOT, spillover from corn, soy

 

 

U.S. wheat futures are seen starting firmer on Monday, following overnight strength and ideas of gains in corn and soybeans.

 

Benchmark Chicago Board of Trade December wheat is called to open 1-2 cents firmer.

 

In e-cbot overnight trade, December wheat was 2 cents higher at US$3.94 1/2.

 

Cooler, wetter weather in the corn belt could slow the maturity and harvest for corn and soybeans, sources said, and support futures prices. That in turn could support wheat, which has fallen sharply since shooting up in late August and early September on crop woes.

 

"After the beating wheat took last week, it's coming up for air on the back of corn and soybeans," said John Kleist of Top Third Ag Marketing. "All in all we got to the low end of the monthly range. Plus we have the underlying sentiment of crop worries."

 

DTN Meteorologix noted the Southern Plains will be mainly dry Monday through the daytime hours of Wednesday, with a chance for scattered thundershowers, through northern and eastern areas during Wednesday night. Temperatures are forecast to average below or much below normal during Monday, but will warm up starting Tuesday. There's another chance for light showers through northern and eastern areas by the end of the week. The six to 10 day outlook calls for temperatures average near to above normal and rainfall near to below normal.

 

Analysts will be keeping a watch on early winter wheat planting. The recent rainfall in the Plains will help replenish severely depleted soil moisture after this spring and summer's drought, but more rain will be needed. Last week the U.S. Department of Agriculture said 9% of the crop is seeded, versus 11% in 2005 and 12% on the five-year average. USDA is scheduled to release another crop progress report after the close of trade Monday.

 

DTN Meteorolgoix said in Australia, any shower activity during the next seven days is expected to be light and mostly confined to southern West Australia and Victoria.

 

The forecast for Argentina suggests any rains during the next seven days should be light, except possibly a little heavier in eastern areas as a cold front moves across Thursday night into Friday.

 

Rio Grande do Sul's Rural Assistance Agency, Emater, said Friday that a cold snap last week likely destroyed 49% of the crop in some parts of the state, the local Estado newswire reported. Final estimates could take as long as a month, sources at Embrapa, the government crop science institute, told Dow Jones Newswires last week.

 

The Commodity Futures Trading Commission said in the week ending Sept. 12, funds are net short 747 contracts in CBOT wheat, while commercials are net long 31,483 contracts. Funds added to both long and short positions, while commercials cut from both categories.

 

For the Kansas City Board of Trade, the CFTC said funds are net long 37,215 contracts of wheat, even though funds cut the position slightly. Commercials are net short 34,590 contracts and trimmed shorts modestly.

 

At the Minneapolis Grain Exchange, the CFTC said funds are net long 6,831 contracts after trimming both long and short positions. Commercials are net short 5,654 contracts and lightly sliced short positions.

 

Light pressure may stem from ideas China is poised to export more wheat in the 2006-07 marketing year starting October, amid a good harvest and possible surpluses in the domestic market. But whether this comes to pass will depend on post-harvest market conditions as well as the government's willingness to resume export quotas, Asian sources said.

 

Premiums for wheat delivered to Asia are expected to remain steady in the week ahead, as strong demand for vessels to ship commodities to the continent have kept freight rates high, sources in Asia told Dow Jones Newswires.