January 17, 2007

 

US Wheat Outlook on Wednesday: 4-6 cents up on overnight; looking to corn

 

 

U.S. wheat futures are expected to start Wednesday's day session firmer on a stronger overnight tone and with leadership from the corn market, floor sources said said.

 

Benchmark Chicago Board of Trade March wheat is called to open 4 to 6 cents higher per bushel.

 

In e-cbot overnight electronic trading, CBOT March wheat rose 4 1/4 cents to US$4.68 1/4.

 

CBOT corn has given wheat direction recently and will continue to do so in the near term, sources said. More strong gains in corn or in soybeans will limit selling interest in wheat, a technical analyst added.

 

Wheat futures also may see a technical boost from the end of the rebalancing of the Dow Jones-AIG Commodity Index Fund, sources said. Floor talk has indicated the rebalancing ended Tuesday.

 

Continued disappointment over slower-than-expected export business, however, may weigh on wheat during the day session, an analyst said. There are ideas the price of U.S. wheat is too high to make it competitive in the world market, he noted.

 

Egypt's Ministry of Trade and Industry said Wednesday that importers had signed contracts for 1.05 million metric tonnes of Kazakh wheat worth US$225 million, with the first 60,000 tonnes expected to be delivered Friday.

 

The news is bearish for U.S. wheat futures, sources said, because traders have been looking for an increase in U.S. export business.

 

In other news, Russia's grain exports also are down, according to a market research institute.

 

The institute said Russia exported 7.3 million metric tonnes of grain in July-December 2006, including 6.6 million tonnes of wheat. That compares with 8.35 million total tonnes of grain, including 7.1 million tonnes of wheat, exported in the corresponding period in 2005. The fall in Russian wheat exports was attributed to growing domestic consumption.

 

The next downside price objective for the bears is closing CBOT March wheat prices below solid support at this month's low of US$4.47 1/2, the technical analyst noted. Bulls' next upside price objective is to close prices above solid resistance at last Friday's high of US$4.86 1/2.

 

First resistance is seen at US$4.70 and then at US$4.75. First support lies at Tuesday's low of US$4.63 and then at US$4.60.

 

The bears' next downside objective at the Kansas City Board of Trade is closing March wheat prices below solid support at this month's low of US$4.67. Bulls' next upside price objective is closing prices above solid chart resistance at last Friday's high of US$5.11.

 

First resistance is seen at US$5.00 and then at Tuesday's high of US$5.06. First support is seen at Tuesday's low of US$4.88 and then at US$4.85.

 

Looking at the weather, a moderate to heavy snow or freezing rain event is expected within the next five days in southern wheat areas in the U.S. Southern Plains, the DTN Meteorlogix weather firm said. The event may hit parts of Texas and Oklahoma, the firm added.

 

In the eastern Midwest and Delta, the coldest portion of a current cold snap is just about over, Meteorlogix reported. No significant problems are expected for wheat in the region.