October 2, 2006

 

US Wheat Outlook on Monday: Stronger on overnight, European prices

 

 

U.S. wheat futures are seen starting firmer on Monday, supported by strength in overnight trade and a rally in European Union wheat prices.

 

Benchmark Chicago Board of Trade December wheat is called to open 7-9 cents firmer.

 

In e-cbot overnight trade, December wheat was 9 cents higher at US$4.52.

 

The rally in the global wheat market is feeding on itself, as French cash and futures wheat prices jumped Friday. Although CBOT wheat closed with modest losses on Friday, it saw sharp gains on the week and that helped to boost European prices. Traders there cited nervousness over tightening high quality global supplies.

 

"It appears that we could be on track to touch the contract highs of US$4.63 basis December," said John Kleist of Top Third Ag Marketing. "We're still in a supply bull market. We do get in a rationing factor at some point, so it will be interesting to see this week's and next week's export sales reports show."

 

Several analysts said to keep the rally in wheat sustained, export business must accompany the price movement higher.

 

Modest pressure might come from the weather forecast for Argentina. DTN Meteorolgoix said there's a good chance for rain to fall in the driest areas of northern La Pampa and Cordoba provinces during the next few days, with scattered showers and thundershowers of 0.10-0.50 inch Monday. However, more rains are needed. For Tuesday, rainfall amounts of 0.20-0.75 inch are forecast. Still, these rains aren't considered drought-busters.

 

In Australia, any rain the next seven days will be mainly confined to West Australia and Victoria as the dry pattern there continues.

 

DTN Meteorologix noted the Southern Plains appears to be drier and warmer than normal during the 10 day period which will help in planting, although the weather firm said more rain is needed to maintain favorable conditions for early developing wheat.

 

A technical analyst said CBOT December wheat bulls are still in control of the market, despite Friday's weakness on profit taking. "Their next upside price objective is to produce a close above solid resistance at Friday's high of US$4.53. The next downside price objective for the bears is closing prices below solid support at US$4.30 a bushel," a technical analyst said. He said first resistance is seen at US$4.48 and then at US$4.50 while first support is at US$4.41 and then at US$4.36 1/2.

 

"It seems to be Friday's losses were end-of-the-month, end-of-the-quarter positioning, so now the bullish technical momentum restarts," Kleist said.

 

The Commodity Futures Trading Commission said late Friday as of Tuesday, funds were nearly flat CBOT wheat, futures and options combined. Funds were net short a mere 548 contracts. They cut shorts by 4,246 and lifted longs by 4,542 contracts. Commercials are net long 31,162, increasing both longs and shorts, with shorts up 10,000 contracts. The small speculator is net short 30.614 contracts.

 

In the Kansas City Board of Trade market, the CFTC said funds were net long 39,384 contracts, and saw both long and short positions rise. Commercials were net short 35,212 contracts and trimmed positions from both sides.

 

At the Minneapolis Grain Exchange, funds were net long 6,071 contracts, with both long and short positions up. Commercials took the other side, net short 5,276 and saw both long and short positions fall. The U.S. Department of Agriculture is scheduled to release its weekly crop progress report Monday after the close, giving an updated view on planting progress. As of Sept. 24, winter wheat sowing was 36% complete.