January 8, 2007

 

US Wheat Outlook on Monday: 1-3 cents lower on follow-through selling

 

 

U.S. wheat futures are expected to start Monday's day session lower on weaker overnight action and with traders hesitant to buy ahead of the release of key government reports Friday, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 1 to 3 cents weaker per bushel.

 

In overnight e-cbot electronic trade, CBOT March wheat slipped 2 1/2 cents to US$4.67 3/4.

 

Traders are looking ahead to Friday's scheduled release of U.S. Department of Agriculture reports on winter wheat plantings and wheat ending stocks, sources said. Plantings are expected to be larger than last year, an idea that has already weighed, they added.

 

Heavy fund liquidation that pressured wheat futures prices last week also could continue Monday, a CBOT floor source noted. Notably, there has been talk among floor traders that the Dow Jones-AIG Commodity Index will sell off wheat contracts Jan. 8 to 12.

 

"It's been well advertised," a source said about the possible liquidation. "Whether it happens is another story."

 

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$4.75 and then at US$4.80. First support lies at Friday's low of US$4.62 1/2 and then at US$4.60.

 

At the Kansas City Board of Trade, the bears' next downside objective is closing March wheat prices below solid support at the August low of US$4.62, the technical analyst added. The bulls' next upside price objective is closing prices above psychological resistance at US$5.00.

 

First resistance is seen at US$4.85 and then at US$4.90. First support is seen at Friday's low of US$4.74 and then at US$4.70.

 

Looking at the weather, no significant weather events are expected in the U.S. Southern Plains through Thursday, although there may be snow Friday or Saturday and then a few days of fairly cold weather, the DTN Meteorlogix weather firm reported.

 

"Early indications suggest that it would not be cold enough to harm wheat but it does bear watching," the firm said.

 

Rain fell through most of the U.S. soft red winter wheat belt during the weekend, and soil moisture remains at adequate or surplus levels, Meteorlogix noted.

 

Argentina, meanwhile, may see scattered thundershowers Wednesday into Thursday, but the region generally still appears to be a drier weather pattern, Meteorlogix said.

 

Argentina's farmers have harvested 13.52 million metric tonnes of wheat from the 2006-07 crop, the Buenos Aires Cereals Exchange said.

 

With 98.1% of the 2006-07 wheat harvest complete, 13.8 million tonnes are expected to come from the Pampas agricultural region this season, according to the exchange.

 

In China, it was colder during the weekend but not cold enough to harm dormant winter wheat, Meteorlogix added.

 

China's wheat prices were little changed the past two weeks, shrugging off rising supply levels after a series of government sales.

 

Market participants said physical dealers had become comfortable with the regular government auctions as they realized they are intended to ensure supply and stabilize prices, and that the government doesn't want to see prices fall significantly.

 

In other news, India's 2007 wheat output is forecast to rise to 72.80 million metric tonnes from 69.48 million tonnes in the previous year, according to the latest industry estimates.

 

According to government estimates, India's wheat sowing, as of Jan. 5, has reached an all-time high of 27.55 million hectares, up from 25.78 million hectares in the year-earlier period.