January 25, 2008

 

US Wheat Outlook on Friday: Surging MGE seen leading the upside

 

 

U.S. wheat futures are expected to start Friday's day session higher following firmer overnight trade, with upside leadership from limit-up gains at the Minneapolis Grain Exchange.

 

Benchmark Chicago Board of Trade March wheat is called to open 8 to 10 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 8 cents to US$9.17.

 

Nearby MGE March wheat soared limit-up, 30 cents higher, overnight and set a new all-time high of US$12.67, exceeding the previous high of US$12.45. MGE spring wheat futures are surging on strong demand and fears about shrinking supplies, traders said.

 

CBOT wheat futures will trail MGE wheat higher, a CBOT floor broker said. CBOT wheat also will look to outside markets and the CBOT corn and soybean pits for direction, he said.

 

There wasn't much news out overnight, but weekly wheat export sales were seen as strong, traders said. Total weekly U.S. export sales, including old-crop and new-crop wheat, were 669,500 metric tonnes, above trade expectations of 300,000 to 600,000 tonnes.

 

Net sales of 422,700 tonnes of old crop wheat were 4% above the previous week and 67% above the prior four-week average, according to the U.S. Department of Agriculture. Thirty-three weeks into the marketing year, export sales are 95% of the USDA's target for the year.

 

Top buyers of old crop wheat were Japan, which booked 127,200 tonnes, and unknown destinations, which bought 100,100 tonnes, the USDA said. Cancellations and buybacks were 151,800 tonnes.

 

Although the solid export sales are supportive to wheat, there is some talk that business may back off if Argentina reopens its wheat export registry, a trader said. The president of the Argentine wheat growers association on Thursday told Dow Jones Newswires the registry will likely reopen this week or next for a limited amount of grain. New export commitments have been blocked since early December.

 

Amid fears about tight global supplies, traders are keeping a close eye on the developing U.S. winter wheat crop. There have recently been some concerns about possible winterkill, but the extent of any damage won't be known until spring, a trader said.

 

Temperatures in soft red winter wheat areas of the eastern Midwest and Delta will warm this weekend and early next week, but there may be additional threats of cold weather later next week, DTN Meteorlogix said in a forecast. In hard red winter wheat areas the central and southern Plains, no significant precipitation or cold weather is expected during the next five to seven days, the private weather firm said.

 

In other news, the Canadian Wheat Board has sharply raised its price outlooks for wheat and durum sold during the 2007-08 (Aug/July) marketing year. The CWB increased its Pool Return Outlooks for wheat by CUS$16 to CUS$33 per metric tonne from December and for durum by CUS$20 to CUS$25 per metric tonne. The CWB said tight global stocks combined with steady demand provided underlying support for wheat prices.

 

CBOT wheat bulls still have the near-term technical advantage, a technical analyst said. Their next upside price objective is to push and close March wheat above strong technical resistance at US$9.40, he said. The next downside objective for the bears is pushing and closing prices below solid support at US$8.79.

 

First resistance is seen at US$9.20 and then at US$9.30. First support lies at US$9.00 and then at US$8.90.

 

At the Kansas City Board of Trade, bulls' next upside price objective is pushing and closing March wheat above solid resistance at US$9.80, the analyst said. The bears' next downside objective is pushing prices below solid support at US$9.30.

 

First resistance is seen at US$9.66 and then at Thursday's high of US$9.74. First support is seen at Thursday's low of US$9.46 and then at US$9.35.