January 10, 2008

 

US Wheat Outlook on Thursday: Lower on bearish momentum, weak demand

 

 

U.S. wheat futures are expected to start Thursday's day session on the defensive on weaker overnight trade and low weekly export sales, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel lower. In e-cbot overnight trading, CBOT March wheat ended down 4 1/2 cents at US$8.85.

 

There should be some follow-through selling from the overnight and from a weak close Wednesday, a CBOT floor broker said. The momentum of the wheat markets is looking bearish, and funds will likely return as sellers as part of their annual rebalancing, he said.

 

"The bulls are fading," a technical analyst said.

 

Weekly export sales also were at the low end of trade expectations. The U.S. Department of Agriculture said export sales for the week ended Jan. 3 were 190,900 metric tonnes, while trade estimates were for 150,000 to 400,000 tonnes. It is the second week in a row that sales have been less than 200,000 tonnes.

 

Among the top buyers were Egypt, which booked 120,000 tonnes, and Nigeria, which took 50,300 tonnes, according to the USDA. Cancellations and buybacks were 79,500 tonnes.

 

In other export news, Japan said it bought 135,000 tonnes of wheat, including 95,000 tonnes from the U.S., in a routine tender concluded Thursday. The shipment is expected to arrive March 10-April 30.

 

It is seen as somewhat bearish that Ukraine is likely to resume grain exports at the end of January, traders said. Ukraine's Economy Ministry said 34 applications had been accepted from exporters for licenses for wheat, barley and corn to Jan. 9.

 

There also is some bearish chatter about a media report that the state-run Trading Corporation of Pakistan postponed a tender for 610,000 tonnes of wheat. The report said Pakistan delayed the tender to Wednesday from Saturday amid concerns about high prices.

 

Traders are waiting for the USDA to put out its January crop report at 8:30 a.m. EST Friday. The report will include estimates on 2008 U.S. winter wheat seedings, 2007-08 wheat carryout and grain stocks as of Dec. 1.

 

Analysts expect to see a significant increase in winter wheat plantings after U.S. wheat futures rallied to new all-time highs in 2007. Bearish expectations about the increaes have resurfaced now that analysts have issued their specific estimates on plantings, a CBOT floor broker 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, the technical analyst said. The next downside price objective for the bears is pushing prices below solid support at US$8.79 1/2. First resistance is seen at US$9.00 and then at Wednesday's high of US$9.16. First support lies at Wednesday's low of US$8.88 and then at US$8.79 1/2.