November 15, 2006

 

US Wheat Outlook on Wednesday: 2-4 cents up on overnight, corn spillover

 

 

U.S. wheat futures are expected to start Wednesday's day session firmer on higher overnight trade and spillover strength from corn, sources said.

 

Benchmark Chicago Board of Trade December wheat is called to open 2-4 cents per bushel firmer.

 

In e-cbot overnight trade, December wheat was up 3 cents to US$4.89 1/2.

 

Wheat created some bullish momentum from a sharply higher close Tuesday that carried into overnight action, analysts said. Still, the market is waiting for more export business to materialize and boost prices.

 

"Without any new export business showing up or new demand news out there, things could quickly reverse," said Chad Henderson of Prime Agricultural Consultants. "I think the high volatility will continue."

 

Three South Korean flour mills said Wednesday they had jointly bought 20,100 metric tonnes of U.S. No. 1 wheat in a tender concluded on Wednesday for shipment Jan. 1-31.

 

Egypt, meanwhile, has imported 1.2 million tonnes of wheat so far in the fiscal year 2006-2007 worth US$250 million, a government-owner Egyptian newspaper said. The paper cited U.S. Wheat Associates as stating that imports were expected to reach 2 million tonnes, worth US$400 million, by the end of the fiscal year, June 30, 2007.

 

"It's become the mantra, over and over: we need to make more sales," a CBOT floor source said.

 

India's wheat stocks as of Nov. 1 had declined to 5.99 million metric tonnes, down 33.8% from 9.05 million tonnes a year earlier, according to the latest government data. India plans its imports of wheat on the basis of these stock levels.

 

Stocks have declined primarily because the government's wheat purchases from local farmers fell to 9.2 million tonnes in 2006 from 14.8 million tonnes last year. Farmers preferred to sell wheat to private traders who offered prices higher than the government-set intervention price, sources said.

 

India's wheat import arrivals at ports so far this are estimated at more than 2.8 million metric tonnes, more than half the total 5.5 million tonnes purchases by the country. The government expects to receive all its imported wheat by the end of February 2007, despite concerns of tight international supplies from countries, an official said.

 

U.S. Department of Agriculture Secretary Mike Johanns said India is too protective against agricultural imports and must be more "flexible." Johanns is scheduled to leave Thursday for a visit to India to discuss agricultural trade.

 

Looking at the weather, dry conditions on the U.S. Southern Plains continue to be a concern, a CBOT floor trader said. The driest areas of the wheat belt, including Oklahoma and south-central Kansas, are expected to stay mainly dry during the next seven days, DTN Meteorlogix said.

 

The Midwest, meanwhile, should see rain and cooler weather during the next 72 hours, the weather firm said.

 

"We need the precipitation for the Plains," the trader said.

 

Ukraine's western crop areas are expected to be mainly dry and mostly warm during the next 10 days, Meteorlogix said. This will reduce available soil moisture for wheat.

 

In China, where a key wheat-producing province has seen drought conditions, any shower activity during the next week or so will be mainly confined to the Yangtze River valley, Meteorlogix said. The parched areas of the Shandong province will see little rain during this period, the firm said.