January 9, 2008

 

US Wheat Outlook on Wednesday: 1-2 cents higher on follow-through, spillover

 

 

Follow-through buying and spillover support are expected to kick U.S. wheat futures higher at the start of Wednesday's day session, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 1 to 2 cents per bushel higher. In e-cbot overnight trading, CBOT March wheat jumped 2 1/4 cents to US$9.09 3/4.

 

Strength in CBOT corn and soybeans and in outside markets should help lift wheat futures at the opening, traders said. However, it could be a struggle for wheat to hold on to gains as there is a lack of fresh fundamental news to feed the bulls, they said.

 

Old crop contracts need to uncover some demand in the near term to rise, an analyst said. Egypt on Tuesday cancelled a tender for wheat and said prices were unsuitable.

 

News of export business overnight was considered routine, as four South Korean flour mills bought 21,300 metric tonnes of U.S. No. 1 wheat in a tender. The shipment is expected to reach South Korea sometime in April.

 

Traders are waiting for the U.S. Department of Agriculture to issue a crop report at 8:30 a.m. EST Friday, and there could be some positioning ahead of the release, analysts said. The report will include new estimates on wheat carryout, quarterly grain stocks and 2008 winter wheat seedings.

 

Analysts expect to see an increase in seedings after U.S. wheat futures climbed to record highs in 2007. They also generally expect 2007-08 U.S. wheat carryout to drop a bit from a month ago, according to a survey by Dow Jones Newswires.

 

The average of analysts' estimates for carryout was 274 million bushels, down from 280 million in December, according to the survey. The range of estimates was 230 million to 316 million.

 

There are no major weather concerns for wheat at this time, traders said. Soil moisture conditions for winter wheat in the eastern U.S. Midwest and Delta are "favorable," DTN Meteorlogix said.

 

The U.S. central and southern Plains should see occasional light precipitation during the next 10 days. Temperatures are forecast to drop in the region, but no damaging cold is expected, Meteorlogix said.

 

A little light snow fell in winter wheat areas of eastern Ukraine on Tuesday. Skies cleared out overnight as temperatures readings in some far eastern areas dropped to 6 to 7 degrees below zero Fahrenheit under minimal snow cover, Meteorlogix said. Temperatures should gradually moderate during the next few days, the private weather firm said.

 

CBOT wheat bulls' next upside price objective is to push and close the March contract above strong technical resistance at last week's high of US$9.45, a technical analyst said. The next downside price objective for the bears is pushing prices below solid support at US$8.79 1/2, he said.

 

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

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing and closing March wheat 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, he said.

 

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.