October 13, 2006

 

US Wheat Outlook on Friday: Egyptian tender may boost prices

 

 

U.S. wheat futures are called to open firmer Friday on news that Egypt issued a tender to buy 55,000 metric tonnes to 60,000 metric tonnes of wheat, sources said.

 

Benchmark Chicago Board of Trade December futures are called to open 2-4 cents higher a bushel.

 

In e-cbot trade, December wheat was 4 1/2 cents higher at US$5.20 a bushel.

 

"It's going to be very volatile," a CBOT floor source said.

 

Egypt's state-owned General Authority for Supply Commodities said it was tendering to buy 55,000-60,000 metric tonnes of wheat for shipment Nov. 11-20, on a free on board basis. GASC is looking to purchase supplies that could include U.S. hard red winter wheat, U.S. soft red wheat or U.S. soft white wheat. GASC's last tender Oct. 4 was for 175,000 tonnes of U.S. and Canadian wheat and helped U.S. futures prices rally.

 

"It's going to have an effect," the floor source said about the tender.

 

The tender came out after the markets closed Thursday and helped wheat to bounce following a lower close. U.S. wheat futures closed lower Thursday with analysts saying new U.S. Department of Agriculture data that cut production and world ending stocks were not bullish enough to support the market.

 

"Any time a market sells off in the face of fresh bullish news, that's a warning signal of a market top being close at hand," a technical analyst said. "But make no mistake, right now the bulls are still very strong and the wheat market is still the leader in the grains."

 

The bulls' next upside price objective is to produce a close above strong resistance at Thursday's contract high of US$5.50 a bushel, the analyst said. The next downside price objective for the bears is closing prices below solid support at US$4.80 a bushel.

 

First resistance is seen at US$5.25 and then at US$5.31. First support lies at Tuesday's low of US$5.11 and then at US$5.05.

 

News that India may not import wheat next marketing year could pressure prices down, a source said. India on Friday announced a plan to boost domestic wheat output and bring an additional 1.41 million hectares under the crop in six provinces.

 

U.S. export sales and shipment figures released Friday showed a net change of 692,300 metric tonnes over last week, a marketing year high. Iraq's purchase of 300,000 tonnes of hard red winter wheat made up the bulk of the weekly sale total.

 

Japan, meanwhile, said it bought 20,000 metric tonnes of U.S. hard red winter wheat and 20,000 tonnes of Canadian wheat in a tender ended Thursday.

 

In other news, Ukraine's railway authority Ukrzaliznitsa Friday said it had suspended the transportation of export wheat to two sea ports and planned to suspend shipments to others next week. The port storage authorities have said they are overload because the Ukrainian government has not issued any export licenses since it began requiring them Oct. 3.

 

In Australia, AWB Ltd.'s prospects of retaining its wheat export monopoly are said to have suffered another blow. The Western Australian Liberal Party said grain growers should have the option to sell their wheat to other "reputable and capable organizations," according to a news report.

 

In related news, AWB said it has an international global trading business based in Geneva, which last fiscal year moved two million metric tonnes of grain and is still gathering momentum. There have been rumors of the company sourcing non-Australian wheat and other grains.

 

Australia has suffered a severe drought this crop year that has slashed production levels. DTN Meteorlogix said some light rain is expected in South Australia and Victoria during, and also in New South Wales and Queensland early next week.

 

The weather firm said recent rain has improved planting conditions in the U.S. Southern Plains but more is needed to prevent further losses in production.

 

The weather firm said in Argentina widespread showers and thunderstorms of 0.50-1.50 inches are expected throughout the central grain belt during the next 24-48 hours.

 

Argentine cash and futures wheat prices were lower Thursday on the week on expectations that the government would act soon to limit wheat exports, traders said.