January 15, 2008

 

US Wheat Outlook on Tuesday: Consolidation expected in old crop

 

 

U.S. wheat futures are expected to start Tuesday's day session mixed amid bear spreading and consolidation in old-crop contracts after recent rallies, traders said.

 

Deferred contracts should be firmer, led by the Kansas City Board of Trade, amid ongoing bullishness about lower-than-expected 2008-09 winter wheat seedings, analysts said.

 

Benchmark Chicago Board of Trade March wheat is called to open 5 to 7 cents per bushel lower. In overnight electronic trading, CBOT March wheat fell 5 1/2 cents to US$9.11 1/2.

 

Nearby wheat futures are due to consolidate as the markets have rallied hard since the U.S. Department of Agriculture on Friday released bullish seedings estimates, traders said. Profit-taking should be a feature for the old crop contracts, they said.

 

CBOT July wheat, which represents the new crop, was stronger overnight, and KCBT July wheat ended the electronic session limit up. KCBT July wheat closed limit up, 30 cents higher, Monday and Friday after the USDA shocked traders by estimating that 2008-09 seedings of hard red winter wheat, traded at the KCBT, were down from a year ago.

 

KCBT wheat should continue to be a leader of CBOT and the Minneapolis Grain Exchange amid the concerns about low HRW wheat acreage, a CBOT floor trader said. Deferred months at all three exchanges also should continue to gain on nearby contracts due to the fears about the new crop, he said.

 

There is "plenty of business being done around the world" to help support the markets, a CBOT floor trader said. Turkey is tendering for 200,000 metric tonnes of wheat for shipment in February or March, according to a media report.

 

Jordan is tendering to buy 100,000 tonnes of hard wheat, of any origin, on a cost and freight basis. Of the total, 50,000 tonnes are for shipment before Feb. 20 and 50,000 tonnes are for shipment Feb. 21 to March 5, an official said.

 

Japan is seeking 138,000 tonnes of wheat, including 93,000 tonnes from the U.S., in a routine tender to be concluded Thursday for delivery March 6 to April 30.

 

State-run Trading Corp. of Pakistan, meanwhile, has extended the deadline for bids to import around 610,000 metric tonnes of wheat to Jan. 21 from Jan. 17, a senior company official said. This was the third extension for the tender, floated Jan. 1, leading some traders to speculate that the government was unhappy with the bids it had received so far because of high international wheat prices.

 

CBOT wheat bulls' next upside price objective is to push and close March wheat above strong technical resistance at US$9.45, a technical analyst said. The next downside price objective for the bears is pushing prices below solid support at US$9.00. First resistance is seen at US$9.30 and then at US$9.40. First support lies at US$9.12 1/2 and then at US$9.00.

 

At the KCBT, the bulls' next upside price objective is pushing and closing prices above solid resistance at today's high of US$9.54, the technical analyst said. The bears' next downside objective is pushing prices below solid support at US$9.24, which would fill on the downside an upside price gap on the daily bar chart. First resistance is seen at US$9.44 and then at US$9.54. First support is seen at Monday's low of US$9.30 and then at US$9.24.

 

No significant precipitation is expected in HRW wheat areas of 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. Little precipitation and periods of cold weather is unfavorable to poorly established wheat or any crop which has yet to emerge, the private weather firm said.

 

In the eastern Midwest and Delta, soil moisture conditions remain favorable the winter wheat crop, Meteorlogix said. Temperatures will be turning much colder over the weekend, with some readings down near zero, the firm said.