January 24, 2007

 

US Wheat Outlook on Wednesday: Down after president's speech, e-CBOT

 

 

U.S. wheat futures are expected to begin Wednesday's day session trading 4-to-5 cents lower following weaker prices in overnight trading and profit taking in the absence fresh news in the President's State of the Union address and after Tuesday's strong gains, sources said.

 

In overnight electronic trading, CBOT March wheat fell 5 3/4 cents to US$4.74 1/2, while KCBT hard red wheat declined 6 1/4 cents to US$4.94 1/2.

 

Wheat should start out lower on a "buy the rumor, sell the fact scenario," a floor analyst said. Wheat had a big run up ahead of the president's speech and it was a little overdone with no surprises in the address, the analyst said.

 

The president announced in his speech a plan to reduce U.S. consumption of oil by 20% over the next decade by increasing the amount of renewable fuels to 35 billion gallons and increasing the fuel efficiency of cars and trucks. This information was already in the market on Tuesday, a commission house analyst said.

 

Wheat rallied on technical buying Tuesday ahead of the speech, a floor trader said. However, it is overdone to the upside in the short-term. The outside markets point lower and corn, which has been the leader looks to open weaker as well, the trader noted.

 

On daily technical charts, wheat remains in a down trend on the daily bar charts despite Tuesday's large gains as it does not enjoy the strength that corn and soybeans currently have, a market technician said.

 

The next downside objective for market bears is closing prices below solid support at US$4.47 1/2 in March futures, he said. The bulls need to close prices above solid resistance at US$4.86 1/2 per bushel.

 

First resistance is seen at Tuesday's high of US$4.81 and then at US$4.86 1/2. First support is seen at US$4.75 and then at US$4.70, the technician said.

 

March KCBT wheat closed near the session high Tuesday. The bulls' next upside objective is closing prices above this month's high of US$5.11 per bushel, while the bears look to close prices below this month's low of US$4.67.

 

First resistance for KCBT March is seen at US$5.50 and then at US$5.11. First support is pegged at US$4.98 and then at US$4.93.

 

Mostly dry conditions are expected through Thursday in the U.S. hard red winter wheat belt with a chance for some light precipitation Friday, DTN Meteorologix Weather said. Temperatures are expected to average near to above normal in the period.

 

In the U.S. soft red winter wheat belt, there is a chance for light snow or flurries Thursday and Friday in the northeastern sections of the region, Meteorologix Weather said. Temperatures are expected to average below normal Thursday and below normal Friday in eastern sections of the region.

 

In other wheat news, Japan's Ministry of Agriculture is seeking to purchase 160,000 metric tonnes of wheat in a tender to be concluded Thursday, a ministry of agriculture official said Wednesday.

 

Thursday, the U.S. Department of Agriculture is scheduled to release the weekly export sales report for the week ended Jan. 18.