January 18, 2007

 

US Wheat Outlook on Thursday: 6-7 cents up on CBOT corn strength, e-CBOT

 

 

U.S. wheat futures are expected to start Thursday's day session higher on firmer overnight trade and with continued spillover strength from corn, floor sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 6 to 7 cents per bushel higher.

 

In e-cbot overnight electronic trade, CBOT March wheat was up 6 cents at US$4.83.

 

Support for wheat comes primarily from CBOT corn as wheat's fundamentals remain weak, sources noted. Corn has rallied recently on growing interest in ethanol and on lower-than-expected U.S. Department of Agriculture estimates for production and carryout, they said.

 

Spillover strength from CBOT soybeans also may be supportive, a floor broker added.

 

CBOT wheat bulls do not have the technical strength that corn and soybeans do, but more strong gains in corn or soybeans will limit selling interest in wheat, a technical analyst said.

 

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, he noted. The bulls' next upside price objective is to close prices above solid resistance at last week's high of US$4.86 1/2.

 

First resistance is seen at Wednesday's high of US$4.80 and then at US$4.86 1/2. First support lies at US$4.70 and then at Wednesday's low of US$4.65.

 

At the Kansas City Board of Trade, bulls and bears are on a level near-term technical playing field, the analyst added.

 

The bears' next downside objective is closing KCBT March wheat prices below solid support at this month's low of US$4.67. The bulls' next upside price objective is closing prices above solid chart resistance at last week's high of US$5.11.

 

First resistance is seen at US$5.00 and then at Wednesday's high of US$5.02 1/2. First support is seen at Wednesday's low of US$4.93 and then at this week's low of US$4.88.

 

Fundamentally, wheat does not have much strength either, the broker said. Exports have been slow, and winter wheat seedings are up, he noted.

 

Japan said it bought 80,000 metric tonnes of wheat, including 60,000 tonnes of U.S. wheat, in a routine tender concluded Thursday, an agriculture ministry official said. The shipment is expected to arrive in Japan March 16 to April 15.

 

In another bearish development, the European Union-25 will export less wheat than previously forecast in 2006-07 because more of the grain is available than expected from Russia, Pakistan and Argentina, according to a Strategie Grains report released Thursday.

 

Although, the world wheat market remains extremely tight and world stocks are projected to fall to a record low level, the report cited that alternative available supplies exist. Strategie Grains said these stocks have been due to three key areas: increased exports out of Russia, Pakistan's announcement to export some wheat and a larger-than-expected exportable surplus in Argentina.

 

Growing conditions also have been favorable in the U.S. and South America, traders said.

 

In the U.S. Southern Plains, snow of at least four inches is expected Friday through Saturday and more than eight inches is not out of the question, the DTN Meteorlogix weather firm reported. Cooler to colder weather should follow the snow but it won't be severely cold, the firm added.

 

In the eastern Midwest and Delta, a cool to cold weather pattern continues, although damaging cold weather is not expected, Meteorlogix said.