January 10, 2007

 

US Wheat Outlook on Wednesday: Mixed open; pressure expected from funds

 

 

U.S. wheat futures are expected to start Wednesday's day session mixed after a nearly flat overnight trade but with pressure later from continued index fund liquidation, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open mixed.

 

In e-cbot electronic trade, CBOT March wheat was up 1/4 cent at US$4.53 1/4 a bushel.

 

Index funds sold an estimated 5,000 March contracts late in the day session Tuesday and will likely liquidate near the end of the session again Wednesday, sources said.

 

Early on, however, there may be some support from rumors that Iraq announced overnight it had purchased 700,000 metric tonnes of U.S. wheat and 300,000 tonnes of Canadian wheat for January/February shipment, a CBOT floor trader said. The reports could boost wheat futures prices amid a lack of other fresh fundamental news, he said.

 

In other export news, Japan said it is seeking 150,000 metric tonnes of wheat in a routine tender to be concluded Thursday for shipment Feb. 15 to March 16.

 

Three South Korean flour mills bought 23,400 metric tonnes of U.S. No.1 wheat in a tender concluded Wednesday. The shipment is scheduled to reach South Korea from March 10 to April 10.

 

CBOT March wheat is still in an 11-week-old downtrend on the daily bar chart, a technical analyst 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$4.80.

 

First resistance is seen at US$4.60 and then at Tuesday's high of US$4.64. First support lies at Tuesday's low of US$4.52 and then at US$4.50.

 

At the Kansas City Board of Trade, tears still have solid downside technical momentum, 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 Tuesday's high of US$4.78 and then at US$4.81. First support is seen at Tuesday's of US$4.71 and then at US$4.70.

 

Looking at weather conditions, U.S. Southern Plains wheat areas can expect light to moderate snow, freezing rain and rain during the next five days, along with some fairly cold weather in six or seven days, the DTN Meteorlogix weather firm reported. Lowest temperatures in areas without snow cover should remain above zero Fahrenheit, the firm said.

 

In the eastern Midwest and Delta, the soft red winter wheat belt should see rain, snow and wind during the weekend and cold weather next week, Meteorlogix reported. It should not, however, be cold enough to harm wheat in any areas without snow cover, the firm noted.

 

Chinese winter wheat regions will see seasonally dry weather and occasional minor cold snap, Meteorlogix said.

 

China sold 612,548 metric tonnes of wheat in six provinces Wednesday, the latest in a serious of auctions aimed at stabilizing wheat prices. The prices were little changed from the last auction Friday, and are about the same as cash wheat prices in major producing regions. The wheat was bought under the minimum purchase price by state warehouses last year.

 

In Argentina, scattered thundershowers are seen from Wednesday into Thursday, the firm added.

 

The agriculture minister for Buenos Aires province is calling for Argentina's wheat farmers to refuse to sell their crops in the face of price manipulation by exporters, the ministry said in a press release.

 

Buenos Aires province produces about 60% of Argentina's wheat.

 

Elsewhere, the Pakistani government plans to abolish a 15% duty on wheat exports to help domestic exporters become more competitive in the international market, a government official said.

 

The government made an in-principle decision to abolish the export duty following a meeting between agriculture ministry officials and domestic exporters Friday, an industry source said.

 

The French state grains board, meanwhile, projected the area planted with French soft wheat in 2007-08 at 4.9 million hectares. The estimate was unchanged from last month's forecast.