Pre-Opening Wheat Market Report for 2/3/2006 March wheat traded 2 3/4 cents higher in overnight action.
The move to contract highs in Kansas City and a move to the highest level since October for the Chicago wheat overnight leaves the bulls in control of the wheat market. India traders see the import news of 500,000 tonnes yesterday as too little, too late to slow prices, as the consumption base in India is near 70 million tonnes. The new harvest will hit in mid-March but even after the import news yesterday, India wheat prices continued to push higher. Wheat has attracted significant buying from index funds in recent weeks, and the improved technical action could help attract trend following funds to the long side. Funds were noted buyers of near 6,000-7,000 contracts yesterday and noted buyers of near 3,000 contracts in Kansas City. On top of the India news and a steady flow of exports from the US, the NOAA yesterday put out a warning of La Nina weather pattern which could trigger dryness in the southern US states. March wheat support comes in at 345 1/2 and 341 1/2 with resistance at 350 1/4 and 354 3/4.
A jump in Kansas City wheat supported the early rally after the lower opening. News that India would import 500,000 tonnes of wheat helped spark the early strength. It would be their first import of wheat since 1999. Traders await results of a 1 million tonne tender from Iraq which is now set for Sunday. Weekly US export sales for wheat came in at 429,200 metric tonnes, which was within the range of expectations. Cumulative sales have already reached 79.4% of the USDA forecast for the year as compared to 75.4% on average over the last five years. Sales of 311,800 metric tonnes per week are needed to reach the USDA estimate. The European Union lowered its wheat export subsidy for their weekly tender to just 4.92 euros as compared with 6.74 euros last week. Lower subsidies are seen as a supportive factor, as this may help US wheat become a bit more competitive on the world export market.
There is still mostly dry weather expected for the next 5 days in the southern plains, and the 6-10 day forecast is also mostly dry. The central plains may get some rain/snow on Sunday/Monday. Basis was steady for hard wheat. South Korea bought 21,500 tonnes of US wheat overnight. India will import 500,000 tonnes of wheat. The threat to future supply in the US may make stocks a bit more valuable, and production losses in the US and the Ukraine should be enough to drive world ending stocks to historically low levels when compared with usage. The longer term fundamentals continue to improve, and wheat could develop as a major bull market for 2006. July wheat support comes in at 365 1/2 with 383 as next resistance.
