November 16, 2005

 

US Wheat Outlook on Wednesday: Mixed; Egypt buys vs technical rebound

 

 

U.S. wheat futures were called to open flat to mixed Wednesday as bearish news that Egypt bought 300,000 metric tonnes of Australian and French wheat and no U.S. grain was offset by ideas of a technical rebound from Tuesday's contract low, brokers said.

 

Chicago Board of Trade wheat futures broke within the last few minutes of Tuesday's trade on fund sales to set a new contract low in CBOT December wheat. Speculative commodity funds are thought to hold a near-record short position of about 51,000 CBOT wheat futures.

 

Meanwhile, the lack of sales to Egypt overnight, when export demand is needed to underpin U.S. prices, was disappointing, brokers said.

 

The U.S. has dropped from being the top wheat supplier to Egypt in 2003 to being the fifth largest in 2005 as Australia and Argentina have gained market share. Egypt last bought wheat Oct. 29, when it purchased 120,000 tonnes of U.S. and Australian wheat.

 

Still, the U.S. Wheat Associates said it had established a one-year long credit line worth US$150 million to facilitate wheat imports for Egypt, Lebanon and Jordan, according to a Cairo newspaper Wednesday.

 

In the overnight e-CBOT session, December wheat at the Chicago Board of Trade closed up 1/2 cent at US$3.07 1/2 while March closed up 1 cent at US$3.24 1/2 after setting Tuesday a nine-month low of US$3.23.

 

First resistance for CBOT March wheat was put at US$3.27 1/2 and then at US$3.31 1/23 - Tuesday's high. First support was seen at US$3.23 - Tuesday's low - and then at US$3.21 1/2 - the contract low, a technical analyst said.

 

Cash U.S. hard red and soft red winter wheat basis bids were steady to firm Wednesday; and spring wheat basis bids were also steady to firm, with a 10-cent gain in the spot Minneapolis rail basis bids, grain merchandisers said.

 

Forecasts called for mostly dry weather through Sunday after light flurries across the central and northern U.S. hard red winter wheat growing region during the past 24 hours. Temperatures should rise to above-normal levels during the weekend.

 

In other U.S. wheat news, the U.S. Department of Agriculture Tuesday lifted its day-old suspension on AWB (USA) Ltd., a U.S. subsidiary of Australia's state trading enterprise AWB Ltd., from participating in U.S.-run export credit programs, USDA spokesman Ed Loyd said.

 

The USDA lifted the suspension after Australia promised to investigate allegations that AWB Ltd. made illegal payments to the former Saddam regime while participating in the United Nations' Oil-for-Food Program.

 

In global wheat news, Ukraine's agriculture ministry raised its 2006 winter milling wheat harvest forecast to 6 million metric tonnes from the previous figure of 4.0 million to 4.5 million tonnes, according to the ministry's press service Wednesday.