September 28, 2006

 

US Wheat Outlook on Thursday: Up 1-2 cents on lower Australian estimate

  

 

Traders and analysts expect U.S. wheat futures to open 1 cent to 2 cents a bushel higher on a steady to firm overnight trade and a cut to Australia's crop estimate, sources said Thursday.

 

In e-cbot trade basis December contracts, Chicago Board of Trade wheat rose 2 1/4 cents to US$4.26 1/2, Kansas City Board of Trade wheat was up 1/2 cent to US$4.79 1/2 and Minneapolis Grain Exchange wheat was up 3/4 cent to US$4.60 1/4.

 

Australian grain marketer AWB Ltd. slashed its annual wheat production estimate Thursday, pegging the crop at 12 million to 15 million metric tonnes, down from its previous estimate of 18 million to 20 million tonnes.

 

Dry conditions and warm temperatures in New South Wales, Victoria and South Australia were cited for the lower projection. The Western Australian crop has stabilized with recent rains, however, it said.

 

The U.S. Department of Agriculture in September estimated the Australian crop at 19.5 million tonnes, from 21.5 million tonnes in August.

 

The International Grains Council lowered its world wheat production estimate by 5 million tonnes from its August forecast to 588 million tonnes, down 30 million tonnes from last year's harvest.

 

U.S. weekly export sales for the week to Sept. 21 were a net 408,400 tonnes, 21% below the previous week but within trade expectations for 350,000-500,000 tonnes. Major increases were reported for Japan at 82,100 tonnes, Nigeria at 59,500 tonnes, Taiwan at 44,800 tonnes and Egypt with 44,500 tonnes, the USDA said.

 

Shipments totaled 318,800 tonnes, down 40% from the previous week and 29% below the previous four-week average.

 

Export commitments for 2006-07 total 10.145 million tonnes, down from the same time last year at 13.260 million tonnes.

 

In other news, India said it won't accept a cargo of 50,000 tonnes of Russian wheat until it is cleaned and upgraded. Under the specifications of the tender issued in June, the wheat shouldn't have contained more than 1% foreign matter, but a port health officer's report shows it around 1.1%. Several other cargoes of Russian wheat have all passed quality tests, however.

 

In export news, Japan bought 80,000 tonnes of wheat Thursday, which includes 60,000 tonnes of U.S. and 20,000 tonnes of Canadian wheat, to be shipped between Nov 1-30. The U.S. wheat is made up of 20,000 tonnes western white and 40,000 tonnes of dark northern spring.

 

Traders continue to watch the weather in Australia and Argentina for rains that would benefit parched crops in those countries.

 

In Argentina, forecasts call for increasing showers in the next five to seven days, though most of the rain is expected to fall over north-central, northeastern and east-central areas, DTN Meteorlogix said. Mostly dry conditions are expected Thursday and Friday, with scattered showers seen over the weekend.

 

In Australia, scattered showers with 0.10-0.50 inch fell over northeastern New South Wales and southeastern Queensland in the last 24 hours. Any showers over the next seven days will be confined to Western Australia and Victoria, but rain is needed in all areas to prevent further yield declines, Meteorlogix said.

 

Traders and analysts are also looking to Friday's release of the USDA's quarterly grain stocks and small grains reports. They peg all-wheat production at an average 1.792 billion bushels, down 9 million bushels from the USDA's 1.801 billion estimate made in August.

 

Wheat stocks as of Sept. 1 are expected to total 1.711 billion bushels on average, down from 1.923 billion in USDA's Sept. 1, 2005, report.

 

Technically, CBOT December wheat closed Wednesday near midrange but did hit an early nine-week high. Bulls still have momentum and their next objective is to close above resistance at Wednesday's US$4.00 high. Bear's objective is to close below US$4.10 support, an analyst said.