January 11, 2007

 

US Wheat Outlook on Thursday: Up 6-8 cents on overnight; choppiness expected

 

 

U.S. wheat futures are expected to start Thursday's day session stronger on firmer overnight trade and with spillover support from the neighboring corn market, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 6 to 8 cents per bushel higher.

 

In e-cbot electronic trade, CBOT March wheat rose 8 cents to US$4.57 1/2.

 

Wheat futures followed CBOT corn higher overnight and could rally on borrowed strength during the day session, a floor trader noted. Short-covering also may boost wheat prices, he said.

 

Trading, however, is expected to be choppy and two-sided ahead of the much-anticipated released of U.S. Department of Agriculture crop reports on Friday, the trader added. Index fund selling and fund rebalancing has pressured wheat futures this week and could continue Thursday, sources said.

 

Little impact is seen from Thursday's USDA report on weekly U.S. wheat export sales, an analyst said. The USDA said sales for the week ended Jan. 4 totaled 244,400 metric tonnes, within analysts' expectations of 200,000 tonnes to 350,000 tonnes.

 

The sales were 81% above the previous week but 31% under the prior 4-week average, according to the USDA.

 

Sri Lanka bought 114,000 tonnes, its first purchase since the 2000-01 marketing year, the USDA noted. Egypt bought 60,000 tonnes, and Nigeria bought 38,000 tonnes, according to the USDA.

 

In other export news, Japan said it had bought 150,000 tonnes of wheat in a routine tender concluded Thursday for delivery March 16 to Feb. 15. The purchase tender included 56,000 tonnes of U.S. dark northern spring wheat, 34,000 tonnes of U.S. western white wheat and 20,000 tonnes of U.S. hard red winter wheat.

 

The Taiwan Flour Millers Association said it bought 43,180 metric tonnes of U.S. No. 1 wheat from trading houses. The entire shipment is likely to reach Taiwan from Feb. 14-28.

 

Four South Korean flour mills bought a total of 22,800 metric tonnes of U.S. No. 1 wheat in a tender concluded Thursday for delivery Feb. 15 to March 16, a trader in Seoul said.

 

The next downside price objective for bears is closing CBOT March wheat prices below solid support at US$4.25, a technical analyst said. The bulls' next upside price objective is to close prices above solid resistance at US$4.70.

 

First resistance is seen at Wednesday's high of US$4.57 1/2 and then at US$4.60. First support lies at Wednesday's low of US$4.47 1/2 and then at US$4.45.

 

At the Kansas City Board of Trade, the bears' next downside objective is closing March wheat prices below solid support at the August low of US$4.62, the technical analyst added. The bulls' next upside price objective is closing prices above psychological resistance at US$5.00.

 

First resistance is seen at Wednesday's high of US$4.74 and then at US$4.78. First support is seen at Wednesday's low of US$4.67 and then at US$4.62.

 

Some bearish pressure may come from forecasts for precipitation expected this weekend and early next week in winter wheat growing areas, floor sources said. The impact of the weather may be minimal, however, because it is already known that the crops are off to a good start, they added.

 

The DTN Meteorlogix weather firm reported snow, ice and rain are possible in the U.S. Southern Plains during the weekend but noted that melted precipitation will be much less than in the area's past two storms. Moisture of 1/4 inch to 1 inch is expected.

 

"Soil moisture will continue to improve for winter wheat," Meteorlogix said. "Temperatures will not be cold enough to cause any damage to wheat as any subzero cold would be under protective snow cover."

 

In the eastern Midwest and Delta, the soft red winter wheat belt should see a heavy rain event early next week followed by colder weather, the weather firm reported. No damaging cold is indicated.

 

In China, winter wheat will see seasonally dry weather and occasional minor cold snaps, Meteorlogix added.

 

In other news, Pakistan's Punjab province will float a tender Jan. 15 offering 500,000 metric tonnes of wheat to domestic traders, an official said. Bids for the wheat from state granaries are due by Jan. 18 and must be "exclusively for exports," the official said.

 

Pakistan's federal government has said it will abolish a 15% export duty on wheat in the next few days to help make Pakistani wheat exports more competitive.

 

Morocco's state wheat buyer, meanwhile, said Thursday it was tendering to buy 5,000 tonnes of European Union hard wheat for shipment before March 31.