January 19, 2007

 

US Wheat Outlook on Friday: Flat to 2 cents down following overnight tone

 

 

U.S. wheat futures are expected to start Friday's day session flat to lower after weaker overnight trade but with some support from stronger-than-expected export sales, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open steady to 2 cents lower per bushel.

 

In e-cbot overnight trade, CBOT March wheat was down 2 1/4 cents to US$4.68.

 

CBOT corn, considered the driver of wheat futures prices, also ended the overnight session on the defensive. Early weakness from corn will likely spill over into wheat, a floor trader said.

 

The U.S. Department of Agriculture, however, reported both grains had strong weekly export sales for the week ended Jan. 11, a source noted. That could translate into some fundamental support for wheat, he said.

 

Weekly U.S. wheat export sales totaled 824,700 metric tonnes, according to the USDA. That was above the estimates of analysts surveyed by Dow Jones Newswires, who had predicted sales between 250,000 tonnes and 600,000 tonnes.

 

The sales were 3 1/3 times the previous week and 2 3/4 times the prior 4-week average, according to the USDA.

 

Major increases were reported for Japan, which bought 139,200 tonnes, and Iraq, which bought 100,000 tonnes. Unknown destinations bought 116,000 tonnes, the USDA said.

 

But other fundamental factors remain negative for wheat, an analyst added. Weather has been favorable for growing conditions, and winter wheat seedings are up, he said.

 

Indeed, snow and some rain through southern areas of the U.S. Southern Plains will continue to recharge soil moisture for wheat, according to the DTN Meteorlogix weather firm. There is no damaging cold weather expected during the next 10 days, the firm said.

 

Damaging cold weather also is not expected in the eastern Midwest and Delta, where a "cool-to-cold" weather pattern should continue, Meteorlogix reported.

 

India's wheat plantings between Oct. 1 and Jan. 19, meanwhile, are estimated at a record 28.11 million hectares, up from 26.36 million hectares in the year-earlier period, the latest government data showed Friday.

 

Plantings of wheat so far have already surpassed last year's total of 26.6 million hectares and the early sown crop in the western province of Gujarat is already being harvested in very small daily volumes of 40-50 metric tonnes.

 

Reviewing Thursday's trading action, CBOT March wheat prices closed near the session low as trading turned choppy, a technical analyst noted. Wheat is still in a three-month-old downtrend on the daily bar chart, he said.

 

"Wheat bulls do not enjoy the technical strength that corn and soybeans presently possess," he said. "But more strong gains in corn or soybeans will limit selling interest in wheat."

 

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 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 US$4.80 and then at US$4.86 1/2. First support lies at Thursday's low of US$4.67 and then at US$4.63.

 

Kansas City Board of Trade March wheat prices also closed nearer the session low Thursday and scored a bearish "outside day" down on the daily bar chart, the analyst added. Bulls and bears are on a level near-term technical playing field, he said.

 

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 Thursday's high of US$5.06. First support is seen at this week's low of US$4.88 and then at US$4.85.