January 14, 2008

 

US Wheat Outlook on Monday: Sharply higher on USDA follow-through

 

 

U.S. wheat futures are expected to start Monday's day session sharply higher, with new-crop contracts leading the charge after the government released a bullish crop report Friday, analysts said.

 

Benchmark Chicago Board of Trade March wheat is called to open 12 to 15 cents per bushel higher. In overnight electronic trading, CBOT March wheat was up 12 1/2 cents at US$9.21 3/4.

 

CBOT July wheat, which represents the new crop, is expected to open at or near limit up, 30 cents higher. In overnight trading, CBOT July wheat rose 30 cents to US$8.06.

 

"Follow through buying is expected to drive prices higher," said Brian Hoops, president of Midwest Market Solutions.

 

Kansas City Board of Trade July wheat also was limit up overnight on carryover bullishness from Friday's U.S. Department of Agriculture report on winter wheat seedings. The report showed 2008-09 seedings of hard red winter wheat, traded at the KCBT, were down from the previous year.

 

Wheat industry members had widely predicted plantings would be up from last year as U.S. wheat futures rallied to new all-time highs in 2007. KCBT July wheat is expected to lead CBOT and MGE wheat futures, traders said.

 

No significant precipitation is expected for HRW wheat in the U.S. central and southern Plains during the next seven to 10 days, DTN Meteorlogix said in a forecast. Some periods of cold weather can be expected, although no damaging cold is indicated at this time, the private weather firm said.

 

"Little precipitation and periods of cold weather are unfavorable to poorly established wheat or any crop which has yet to emerge," Meteorlogix said.

 

In the eastern Midwest and Delta, soil moisture conditions are favorable for soft red winter wheat, Meteorlogix said. Temperatures will be turning much colder during the weekend, with some readings down near zero, the firm said.

 

Along with the bullish USDA reports, traders are eyeing the softer U.S. dollar as being bullish, Hoops said. Weakness in the greenback is seen as supportive because it gives foreign importers more buying power.

 

CBOT wheat bulls' next upside price objective is to push and close March wheat above strong technical resistance at US$9.20, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at last week's low of US$8.79.

 

First resistance is seen at US$9.20 and then at US$9.30. First support lies at US$9.00 and then at US$8.90.

 

At the KCBT, the bulls' next upside price objective is pushing and closing March wheat above solid resistance at US$9.40, the technical analyst said. The bears' next downside objective is closing prices below solid support at last week's low of US$8.82.

 

First resistance is seen at US$9.35 and then at US$9.45. First support is seen at Friday's low of US$9.12 and then at US$9.00.

 

Wheat prices in China were mostly stable in the week to Monday due to sustained supply from the government. Wheat prices in Hebei province were between RMB1,600-RMB1,680 a metric tonne, unchanged from a week ago.

 

Japanese officials are in talks with domestic flour-milling companies to raise government-set prices of imported wheat by around 30% starting in April, according to a media report. The government also is considering expanding the list of countries from which it buys wheat beyond the U.S., Australia and Canada.

 

In other news, the wheat harvest in Western Australia has ended and exceeded earlier expectations, although output was still well down on average due to drought, according to the storage and handling business Cooperative Bulk Handling Ltd. Total grain deliveries to CBH's terminals will reach 8.5 million metric tonnes, up from a drought-affected 6.2 million tonnes from the previous crop. Wheat usually makes up about 70% of deliveries to CBH.