January 17, 2008

 

US Wheat Outlook on Thursday: Stronger on follow-through, momentum

 

 

Follow-through buying and bullish momentum are expected to kick U.S. wheat futures sharply higher at the start of Thursday's day session, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 10 to 15 cents per bushel higher. In overnight electronic trading, CBOT March wheat climbed 12 1/2 cents to US$9.39.

 

Kansas City Board of Trade hard red winter wheat futures and Minneapolis Grain Exchange hard red spring wheat futures should continue to lead CBOT soft red winter wheat, traders said. Concerns about tight supplies remain bullish for hard wheat, while SRW wheat acres are up sharply from last year, they said.

 

MGE March wheat in the overnight electronic session traded to a new all-time high of US$11.60, exceeding the previous high of US$11.37 3/4 set Wednesday. That is the highest price for a wheat future at any U.S. exchange.

 

Short position holders are "on the ropes" at the MGE, a trader said.

 

The markets also are waiting for the results of an Egyptian tender. Egypt's state-owned General Authority for Supply Commodities said Wednesday it would tender to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Feb. 5-20, on a free-on-board basis.

 

Bids for the tender were mostly from the U.S., Russia and Kazakhstan. GASC last week canceled a wheat tender for shipment Feb. 1-15 due to unsuitable prices.

 

Japan said it bought 150,000 metric tonnes of wheat, including 105,000 tonnes from the U.S., in a routine tender. The shipment is expected to arrive March 6 to April 30.

 

The U.S. Department of Agriculture said 404,800 tonnes of old crop wheat and 89,000 tonnes of new crop wheat were sold in weekly export sales. That was within trade estimates of 300,000 tonnes to 550,000 tonnes for sales in the week ended Jan. 10.

 

Major buyers of the old crop included Indonesia, which booked 158,300 tonnes, including 156,000 tonnes switched from unknown destinations; Japan, which took 93,100 tonnes; and Taiwan, which bought 80,500 tonnes. Cancellations and buybacks of old crop wheat were 81,300 tonnes.

 

The weekly export sales are "very solid," and there is still global demand for U.S. wheat, a CBOT floor trader said. Indonesia, for example, would typically buy from Australia but had to come to the U.S. because the U.S. has the supplies, he said. Australia's output has been slashed by drought for the past two year.

 

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 Wednesday's high of US$9.34 and then at US$9.45. First support lies at US$9.20 and then at US$9.08.

 

At the KCBT, bulls' next upside price objective is closing March wheat above solid resistance at US$9.66, 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, he said.

 

First resistance is seen at US$9.66 and then at US$9.78. First support is seen at US$9.50 and then at US$9.45.