January 4, 2008

 

US Wheat Outlook on Friday: Weaker start seen amid profit-taking

 

 

Profit-taking and weak export sales are expected to weigh on U.S. wheat futures at the start of Friday's day session, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 1 to 2 cents per bushel lower. In e-cbot overnight trading, CBOT March wheat slipped 2 1/4 cents to US$9.42 3/4.

 

Wheat futures have hit limit up at all three U.S. exchanges for the previous two day session and the markets are due for a pullback, a CBOT floor broker said. There is a lack of fresh, supportive news out, he said.

 

The U.S. Department of Agriculture said weekly export sales for the week ended Dec. 27 were 118,700 metric tonnes, below trade estimates of 200,000 to 550,000 tonnes. The sales were 60% below the previous week and 62% below the prior four-week average, according to the USDA.

 

Top buyers included Nigeria, which took 52,300 tonnes; the Philippines, which bought 20,000 tonnes; and the Dominican Republic, which bought 15,000 tonnes. Cancellations and buybacks were 5,600 tonnes.

 

There is market chatter about active export business being done in the world, but U.S. wheat has become even more uncompetitive on the global market following two days of limit up rallies, a CBOT floor broker said.

 

The wheat markets may be able to firm up if commodity funds come in as buyers again, a CBOT floor analyst said. Prices could also strengthen if sellers continue to stay on the sidelines, as they have for the last two days, he said.

 

CBOT wheat bulls' next upside price objective is to push and close the March contract above strong technical resistance at the September 2007 high of US$9.66 1/2, a technical analyst said. The next downside price objective for the bears is pushing prices below solid support at US$9.15, which would fill on the downside this week's upside price gap on the daily bar chart, he said.

 

First resistance is seen at US$9.50 and then at US$9.60. First support lies at US$9.32 and then at Thursday's low of US$9.24.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing and closing March wheat above major psychological resistance at US$10.00, the technical analyst said. The bears' next downside objective is closing prices below solid technical support at US$9.20.

 

First resistance is seen at Thursday's high of US$9.66 and then at US$9.80. First support is seen at Thursday's low of US$9.44 and then at US$9.30.

 

Hard red winter wheat, traded at the KCBT and grown on the U.S. central and southern Plains, may see some beneficial moisture early next week, DTN Meteorlogix said in a forecast. The precipitation would likely focus on northern and eastern areas, according to the private weather firm.

 

There are no significant cold weather threats for HRW wheat, used to make bread, or SRW wheat, used in cakes and pastries, for the next 10 days, Meteorlogix said.

 

Private analytical firm Informa Economics is expected to release updated crop estimates around 10:30 a.m. EST Friday ahead of the USDA's Jan. 11 crop report. Traders are awaiting the USDA report as it will include updated projections on U.S. and world wheat stocks, which are already historically low, and on winter wheat seedings.

 

India's wheat sowing for the crop marketing year that starts in April inched closer to the government set target of 27 million hectares following late planting in some key provinces, the Indian government said. Wheat had been sown in 26.6 million hectares as of Jan. 4, down from 27.5 million hectares a year earlier, according to the government.

 

In Australia, wheat stocks held in storage facilities operated by major bulk grain handling companies and traders as of Nov. 30 fell 35% from a year earlier to 5.5 million metric tonnes, the Australian Bureau of Statistics said. As the harvest of winter grain continues, total stocks held by handlers and traders rose more than threefold from 1.4 million tonnes on Oct. 31, the bureau said.