November 9, 2006
US Wheat Outlook on Thursday: 1-2 cents firmer on new USDA corn estimate
U.S. wheat futures are expected to start Thursday's day session slightly firmer on support from new government data that was seen as bullish for corn, sources said.
Corn has become the leader of the grains and wheat will follow its direction, a Chicago Board of Trade floor trader said.
Benchmark CBOT December wheat is called to open 1-2c higher per bushel.
In e-cbot overnight trade, December wheat was up 3 1/2 cents to US$5.07 1/2.
In its November crop production and supply/demand report, the U.S. Department of Agriculture pegged U.S. 2006-07 corn production at 10.745 billion bushels, below the 10.905 billion estimated in October and the 10.838 billion average analyst estimate.
That is bullish for corn and, in turn, for wheat, the CBOT floor trader said.
"Corn will dictate where everything goes," the trader said.
The USDA left its estimate for 2006-07 U.S. wheat ending stocks unchanged at 418 million bushels, compared to the average analyst estimate of 426 million bushels. Analysts had expected the USDA to increase the ending stocks because of weak export business.
For the current market year to date, export inspections are 358.145 million bushels, down from 439.321 million last year, the USDA said.
The USDA forecast for U.S. wheat exports in the 2006-07 marketing year also remained unchanged in the November report at 2.07 billion bushels.
"There isn't a whole lot in the report for wheat," a CBOT floor source said.
A technical analyst said the next downside price objective for the bears is closing prices below support at last week's low of US$4.78 a bushel. The bulls' next upside price objective is to close prices above solid resistance at Wednesday's high of US$5.19 a bushel.
First resistance is seen at US$5.10 and then at US$5.15. First support lies at Wednesday's low of US$5.01 1/2 and then at 4.95.
In the news, Belarus said it plans to issue tenders to purchase 200,000-250,000 metric tonnes of milling wheat in the 2006-07 marketing year.
An official said Belarus no longer intended to buy wheat in the Stavropol region of Russia, its traditional supplier in the past, because wheat is now being sold there by intermediary traders and not farmers. That has resulted in higher prices, he said.
Japan, meanwhile, said it bought 40,000 metric tonnes of Australia's Prime Hard wheat in a tender concluded Thursday. The shipment is expected to arrive in Japan between Jan. 1-31.
Australia's AWB Ltd. has announced it rejected all 12 applications for permits to export more than 3 million metric tonnes of wheat to eight international markets. AWB said it rejected the applications to protect the financial entitlements of wheat growers who deliver to a collective export sales pool the company operates.
A severe drought in Australia has slashed wheat production forecasts there.
Looking at the weather, DTN Meteorlogix said in the U.S. Southern Plains warmer temperatures promote continued development of wheat but also reduce available soil moisture. Rain is needed most in the Oklahoma and Texas areas, the firm said.
Overseas, wheat growth will continue to be slow in the Ukraine as the crop heads into dormancy, Meteorlogix said. Soil moisture is adequate for now, but rain will be needed in the spring as the crop begins to grow again, according to the firm.
Ukraine reported it had harvested 34.12 million metric tonnes of grain through Nov. 1 on 13.69 million hectares, 96.2% of the total area to be harvested. The average yield of 2.49 tonnes a hectare, an official said.
Ukraine's grain harvest to date is 11.1% smaller than on the same date last year due to adverse weather conditions.
In China, the parched Shandong province will likely continue to be mostly dry during the 10-day period, the firm said.
Argentina should see dry and warm to hot weather during the next five to six days. There is a chance for showers and thunderstorms by next Wednesday or Thursday, Meteorlogix said.
