January 4, 2007

 

US Wheat Outlook on Thursday: 1-2 cents lower to start on overnight tone

 

 

U.S. wheat futures are expected to start Thursday's day session on the defensive after weaker overnight trading and with continued fund liquidation, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 1 to 2 cents lower per bushel.

 

In e-cbot overnight electronic trading, CBOT March wheat slipped 1 cent to at US$4.75 1/2.

 

There was follow-through long fund liquidation overnight from selling that began during Wednesday's day session, a CBOT floor trader said. That trend will likely continue early Thursday, he added.

 

There is too much length in the market, the trader noted.

 

Otherwise, wheat futures are expected to look to CBOT corn futures for direction during the day session, an analyst said. CBOT corn is considered the leader of wheat, and a bounce in corn could give some spillover strength to wheat, he said.

 

Fundamentals for wheat still look weak, CBOT floor sources said. Export sales have been disappointing and new-crop production is expected to increase, they noted.

 

Traders said the market is looking toward the release of U.S. Department of Agriculture reports on Jan. 12 for indications on winter wheat planting and demand.

 

In some fresh export news, Egypt said it was tendering to buy at least 55,000-60,000 metric tonnes of wheat for shipment Feb. 1-10 on a free-on-board basis.

 

The tender was expected after the dramatic declines in wheat futures prices Wednesday, a source said. The results of the tender will help wheat establish direction during the session, he noted.

 

Two South Korean flour mills are seeking 21,500 metric tonnes of U.S. wheat in a tender to be concluded Friday for shipment Feb. 5 to March 6, a trader said Thursday.

 

Looking at the weather, another significant precipitation event is seen for the U.S. Southern Plains late in the next 10 days, the DTN Meteorlogix weather firm said.

 

In the eastern Midwest, rain is helping to maintain adequate-to-surplus soil moisture, and no significant cold weather is in sight, Meteorlogix reported.

 

In China, conditions are expected to be colder Friday and Saturday but not cold enough to harm dormant winter wheat, the firm noted. Long-range charts, however, suggest colder weather may move in next week, Meteorlogix said.

 

Along with bearish fundamentals, wheat futures also have some technical weakness, a technical analyst said. Damage was done to CBOT March wheat's near-term chart Wednesday as prices hit a fresh three-month low, he said.

 

The next downside price objective for the bears is closing CBOT March wheat prices below solid support at US$4.50. The bulls' next upside price objective is to close prices above solid resistance at US$4.94 1/2.

 

First resistance is seen at US$4.80 and then at Wednesday's high of US$4.88. First support lies at Wednesday's low of US$4.76 and then at US$4.70.

 

Kansas City Board of Trade March wheat prices Wednesday hit a fresh 13-week low. Bears had solid downside technical momentum at KCBT and gained more Wednesday, the technical analyst noted.

 

The bears' next downside objective is closing KCBT March wheat prices below solid support at US$4.80. The bulls' next upside price objective is closing prices above psychological resistance at US$5.00, he said.

 

First resistance is seen at US$4.90 and then at US$4.95. First support is seen at Wednesday's low of US$4.85 and then at US$4.80.

 

In other news, Argentina's 2005-06 wheat sales totaled 8.2 million metric tonnes as of Dec. 29, unchanged from two weeks earlier, according to the latest government data. By this time last year, Argentina had sold 11.285 million tonnes of 2004-05 wheat.

 

Stocks of major grains and oilseeds in Argentina totaled 12.4 million metric tonnes as of Nov. 30, according to separate data. Specifically, wheat stocks were at 4.45 million metric tonnes, up from 3.09 million tonnes a month earlier and 2.82 million tonnes in October 2005, the data showed.