January 16, 2007

 

US Wheat Outlook on Tuesday: Up 3-4 cents on corn spillover, overnight

 

 

U.S wheat futures are expected to start Tuesday's day session stronger on spillover support from corn and in line with overnight gains, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 3 to 4 cents per bushel higher.

 

In e-cbot trade, CBOT March wheat was up 3 3/4 cents at US$4.83 1/4.

 

CBOT corn futures led the way to the upside overnight on carryover buying from Friday's day session, while wheat and soybean futures felt ongoing spillover strength, a CBOT floor source said. Corn rallied Friday after the U.S. Department of Agriculture released reports showing production and carryover stocks were lower than expected.

 

As long as CBOT corn futures prices stays strong, wheat will follow out of fear that wheat acres will be replanted with corn in the spring, the source added. If corn is locked at limit up, buyers also will turn their attention to wheat, he noted.

 

CBOT March wheat is still technically in a three-month-old downtrend on the daily bar chart, although wheat will look to the "extremely bullish" corn market for near-term direction, a technical analyst said.

 

The bulls' next upside price objective is to close CBOT March wheat prices above solid resistance at US$5.00, he said. The next downside price objective for the bears is closing prices below solid support at last week's low of US$4.47 1/2.

 

First resistance is seen at Friday's high of US$4.86 1/2 and then at US$4.90. First support lies at Friday's low of US$4.71 and then at US$4.63 1/4.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing March wheat prices above solid resistance at US$5.25, the analyst said. The bears' next downside objective is closing prices below solid support at US$4.84, which is the bottom of Friday's big upside price gap on the daily bar chart.

 

First resistance is seen at Friday's high of US$5.11 and then at US$5.15. First support is seen at US$5.00 and then at Friday's low of US$4.93.

 

Reviewing weather conditions throughout the world's wheat growing areas, DTN Meteorlogix reported it did not appear that there were any major threats to the crops.

 

In the U.S. Southern Plains, it was quite cold again Friday morning, although sub-zero readings were mainly confined to Nebraska and Colorado, the weather firm said. No significant damage to wheat is expected, Meteorlogix noted.

 

The same goes in the eastern Midwest and Delta, where is was colder in the wheat areas but not cold enough to cause damage, the firm reported.

 

Chinese wheat regions also are not threatened by cold weather, Meteorlogix added.

 

China's wheat prices remained stable in the week ending Monday, and government sales had little impact on the spot market, analysts said. Prices of average-quality wheat in Henan province were quoted around RMB1,560 a metric tonne and at RMB1,580-RMB1,600/tonne in Hebei province, unchanged from the previous week.

 

In other news, Japan said Tuesday it was seeking 125,000 metric tonnes of wheat in a tender to be concluded Thursday. The shipment is expected to arrive in Japan March 16 to April 15.

 

Jordan, meanwhile, said it agreed to buy 100,000 metric tonnes of Syrian milling wheat, on a free-on-truck basis. The official Jordanian news agency Petra also reported that the country will buy 500,000 metric tonnes of hard wheat from Syria in 2007 at preferential prices.

 

Jordan bought more than half of its wheat in 2006 from Syria.

 

In Argentina, farmers have completed the harvest of the 2006-07 wheat crop, producing 13.8 million tonnes, the Buenos Aires Cereals Exchange said. The Agriculture Secretariat forecasts 2006-07 wheat production at 13.7, although the USDA is expecting 14.2 million tonnes.

 

Argentina's 2005-06 wheat sales totaled 8.2 million tonnes as of Jan. 12, unchanged from four weeks ago, according to the Agriculture Secretariat's latest data. By this time last year, Argentina had sold 11.285 million tonnes of 2004-05 wheat.

 

The Commodity Futures Trading Commission on Friday reported reported index funds were net long 198,906 combined wheat futures and options contracts at CBOT for the week ended Jan. 9. Index traders cut long positions by 609 contracts and increased short positions by 1,591 contracts.

 

Index funds' long positions represent 39.7% of open interest, down from 41% a week earlier.

 

At KCBT, index funds were net long 28,145 contracts, according to the CFTC. They decreased long positions 1,225 and increased shorts 593.

 

The CFTC does not report index fund commitments at MGE, although it said large speculative traders were net long 8,908. They decreased longs by 3,193 contracts and increased short positions by 443 contracts.