December 12, 2005

  

US Wheat Outlook on Monday: Seen up 2-4 cents on oversold conditions

  

 

U.S. wheat futures are called to open 2 to 4 cents firmer Monday, supported by strength overnight and ideas the market is oversold on technical reasons.

 

In e-cbot trade overnight, most-active March wheat gained 4 cents to US$3.11 1/2.

 

Strength in corn and soybeans in overnight trade could also give wheat support.

 

"Wheat's the only pit that didn't bounce on Friday, so it's due to play catch up flat price, and on the corn-wheat spreads," said John Kleist, of John Kleist Consulting.

 

Wheat futures hit a new contract low on the Chicago Board of Trade Friday and the market could bounce from there.

 

In the Commodity Futures Trading Commission's weekly Commitment of Traders report, funds remain net short, at 58,011 contracts of Chicago Board of Trade wheat, as of Dec. 6. At the Kansas City Board of Trade, funds are net long 33,188 contracts and at the Minneapolis Grain Exchange, funds are net long 8,490 contracts.

 

"We do have to keep in mind in about two weeks the holidays start and it's important to watch what the funds want to do with that short position in (CBOT) wheat, whether they want to cover some of those shorts ahead of the year end and quarter end," Kleist said.

 

Private weather firm DTN Meteorlogix said hard red winter wheat areas of the Plains shouldn't see any significant cold weather for this week, however there are signs of a new Arctic cold snap for early next week. Temperatures are expected to average below or well below normal at that time, with precipitation should average near to below normal, too.

 

"The weather could provide a supportive background to a technical rally," Kleist said.

 

In other news, there were 313 contracts delivered against the December CBOT wheat contract. Major issuers were Banc of America Securities LLC, which issued 279 contracts. ABN Amro stopped 159 contracts.

 

At the Minneapolis Grain Exchange, there were a total of 21 deliveries. Prudential issued the contracts and ADM stopped them.

 

In overseas news, Ukraine's planted winter grains area reached 6.059 million hectares in 2005, compared with 7.46 million hectares in 2004, according to the figures released by the state statistics committee Monday. Winter wheat this year was planted on 5.139 million hectares, which is 1.18 million hectares less than in 2004.

 

Wheat sowing in India covered 18 million hectares in the Nov. 1-Dec. 12 period, compared with 17.6 million hectares in the year-ago period, the Ministry of Agriculture said Monday.

 

Australia's monopoly wheat exporter AWB Ltd. (AWB.AU) Monday cut its an estimate of returns from sales of its benchmark wheat type for the crop year ending March 31, 2006, reflecting soft global prices for the cereal.

 

One large Australia co-op said it expects a slightly smaller harvest that previous expectations, but did not elaborate on a new estimate. It said smaller yields in recently harvested areas attributed to the downward expectations.