January 9, 2007

 

US Wheat Outlook on Tuesday: 4-6 cents lower on weaker overnight trading

 

 

U.S. wheat futures are expected to start Tuesday's day session weaker after lower trading overnight and with pressure from long positions held by index funds, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 4 to 6 cents per bushel lower.

 

In e-cbot overnight trade, CBOT March wheat was down 5 cents at US$4.59.

 

The Commodity Futures Trading Commission on Monday afternoon reported in its supplemental commitment of traders report that index funds at CBOT were reported to hold net long positions totaling 201,104 combined wheat futures and options contracts as of Jan. 3.

 

Traditional large speculative traders were net short 1,094 contracts, according to the CFTC.

 

At the Kansas City Board of Trade, index funds were reported to be net long 29,963 positions combined wheat futures and options, the CFTC said.

 

Traditional large speculative traders at KCBT were net long 22,683 contracts, according to the CFTC.

 

There has been talk among CBOT traders that index funds may reallocate their existing length into CBOT soybeans and out of corn and wheat, sources said. Notably, the Dow Jones-AIG Commodity Index is expected to start re-balancing its positions in wheat Tuesday, they added.

 

Technically, CBOT March wheat is weak after prices Monday hit another fresh three-month low, a technical analyst said. Serious near-term chart damage has been inflicted recently, he said.

 

The next downside price objective for the bears is closing 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 Monday's high of US$4.67 1/2 and then at US$4.70. First support lies at Tuesday's low of US$4.59 1/2 and then at US$4.55.

 

The bears still have solid downside technical momentum at KCBT, the analyst added.

 

The bears' next downside objective is closing KCBT March wheat prices below solid support at the August low of US$4.62. The bulls' next upside price objective is closing prices above psychological resistance at US$5.00.

 

First resistance is seen at Monday's high of US$4.81 and then at US$4.85. First support is seen at last week's low of US$4.74 and then at US$4.70.

 

In other news, Iraq is planning to issue tenders to buy large quantities of wheat from foreign suppliers by the end of this month, the head of Iraq's Grain Board said. He declined to say how much the country is intending to buy, but said it would be a large amount.

 

In India, meanwhile, extreme cold weather in northern areas this month is considered beneficial for the developing wheat crop, an Indian government meteorologist said. India's wheat growing northern provinces, such as Punjab, Haryana and Uttar Pradesh, have been experiencing severe cold, with temperatures dipping to minus 1 degree Celsius in Amritsar, a major city in Punjab.

 

In the U.S. Southern Plains, the wheat areas should see the heaviest precipitation being mostly rain through south-central and southeast areas, DTN Meteorlogix reported. Wheat areas will be colder following this event but probably not cold enough to harm dormant wheat, the weather firm said.

 

The northern portion of the soft red winter wheat belt is expected to turn colder next week but not cold enough to damage wheat, Meteorlogix said.