January 8, 2008

 

US Wheat Outlook on Tuesday: 2-3 cents lower on follow-through selling

 

 

U.S. wheat futures are poised to start Tuesday's day session weaker on follow-through selling from steep losses Monday, with traders expecting to see a sell-off from index funds.

 

The markets also are waiting for the results of an Egyptian tender and looking ahead to a U.S. Department of Agriculture crop report due out Friday.

 

Benchmark Chicago Board of Trade March wheat is called to open 2 to 3 cents per bushel lower. In e-cbot overnight trading, CBOT March wheat fell 1/4 cent to US$9.02 3/4.

 

Traders expect index funds will begin their annual rebalancing Tuesday and sell wheat and soybeans while buying corn. There is market chatter that the funds may need to sell an average of 7,000 contracts of wheat a day until early next week.

 

Traders are also looking for the results of a tender issued after Monday's close by Egypt's state-owned General Authority for Supply Commodities. GASC said it was tendering to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Feb. 1-15, on a free-on-board basis.

 

U.S. bids are looking "more competitive," a CBOT floor trader said. Competition for business is mainly from Russia or Kazakhstan, he said.

 

Other demand news out is seen as routine. Japan is seeking 156,000 tonnes of wheat, including 116,000 tonnes from the U.S., in its weekly tender. The shipment is expected to arrive between March 10 and April 30.

 

Three South Korean flour mills bought 23,000 tonnes of U.S. No. 1 wheat from trading house Columbia Grain in a tender concluded Tuesday, a trader in Seoul said. The shipment is expected to reach South Korea between April 10 and May 10.

 

The Taiwan Flour Millers Association, meanwhile, bought 80,000 tonnes of U.S. No. 1 wheat from trading houses Cargill and Columbia Grains in a tender concluded on Tuesday, an association official said. The first shipment will arrive in Taiwan between Feb. 28 and March 13, and the second between March 18 and April 1.

 

In other news, Friday's USDA crop report is slated to include the government's first forecast on 2008-09 winter wheat plantings and updated estimates on wheat carryout and ending stocks. Traders and analysts expect to see an increase in plantings after wheat futures rallied to all-time highs last year.

 

There are no major weather concerns for winter wheat around the world, traders said. Significant precipitation continues Tuesday in the eastern Midwest and Delta, and there is no damaging cold weather indicated during the next seven to 10 days, DTN Meteorlogix said

 

In the central and southern Plains, some light to moderate precipitation is expected over central Oklahoma and south-central Kansas, according to Meteorlogix. However, neither significant precipitation nor cold temperatures are expected in the region during the next seven to 10 days, the private weather firm said.

 

India said it has adequate wheat to meet domestic demand until at least mid-October because it had imported wheat on a regular basis in 2007 despite high local output and record high international prices. However, some traders said they didn't put too much stock in the statement as an Indian official last week said the government might continue its wheat import program by buying small quantities to boost buffer stocks.

 

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$8.79 1/2 a bushel, he said.

 

First resistance is seen at US$9.20 and then at Monday's high of US$9.30. First support lies at US$9.00 and then at US$8.79 1/2.

 

At the Kansas City Board of Trade, bulls' next upside price objective is pushing and closing prices above solid resistance at last week's high of US$9.66, the technical analyst said. The bears' next downside objective is closing prices below major psychological support at US$9.00.

 

First resistance is seen at US$9.20 and then at US$9.28. First support is seen at US$9.00 and then at US$8.90.