October 31, 2008


US Wheat Outlook on Friday: 6-8 cents lower on spillover, outside markets



U.S. wheat futures are expected to open 6 to 8 cents lower on spillover from expected declines in corn and soybeans, with a rallying U.S. dollar and weakness in crude oil and gold futures providing bearish incentives, traders and analysts said Friday.


The grain and soybean complex fell overnight, with Chicago Board of Trade December wheat down 6 1/4 cents to US$5.31 3/4 cents a bushel, December Kansas City Board of Trade 8 1/4 cents lower at US$5.65 1/4 and December wheat on the Minneapolis Grain Exchange down 3 1/2 cents to US$6.43 1/2 a bushel.


"Almost everything is a little bit lower here today, based on the outside markets," said Jack Scoville, analyst and vice president at Price Futures Group in Chicago.


He expects wheat to open around 5-6 cents lower, as some of the key outside markets have pared earlier losses and the Dow Jones Industrial Average futures are off their lowest levels of the morning in electronic trading.


Longer term, the combination of plenty of supply around the world this year and a good start for the U.S. winter wheat crop will likely continue to prevent wheat prices from making a significant rally.


On the Plains, warm, dry weather will continue to favor late planting and early wheat growth, private forecaster DTN Meteorlogix said. The favorable conditions are expected to last for at least the next five to six days.


Showers may develop Tuesday night into Wednesday, with totals of 0.10-0.75 inch possible in northern and eastern areas of the Plains and less elsewhere. The six- to 10-day outlook for near- to above-normal readings in the western Plains, with near to below normal in the east. Rainfall is expected to be near to below normal, with near- to above- normal totals possible through central Nebraska, Meteorlogix said.


Traders received more sour export news as Japan bought 21,000 metric tonnes of Canadian wheat in a tender Friday but purchased none from the U.S. The tender was originally scheduled to include 96,000 tonnes - 21,000 from Canada and the rest from the U.S., traders said.


The news is further confirmation that there is plenty of wheat at competitive prices around the world, meaning U.S. prices still haven't reached a level where they can stimulate significant export demand.


Hot, dry weather in Australia allowed farmers in central, western and northern New South Wales to begin the 2008-09 wheat harvest. The weather conditions mean the harvest will actually run from south to north this year, contrary to a normal year.

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