January 27, 2010

 

US Wheat Outlook on Wednesday: Seen mixed, waiting for Egypt results

 

 

U.S. wheat futures are expected to start mixed Wednesday as the markets attempt to consolidate and traders wait to see results of an Egyptian tender.

 

In overnight electronic trading, Chicago Board of Trade March wheat edged up 1/2 cent to US$4.94 1/2 per bushel.

 

Prices finished the overnight session slightly higher after trading both higher and lower. The markets are trying to enter a consolidation mode after sharp, recent losses, traders said.

 

The markets are technically oversold after the losses and due for a bounce, a trader said. However, large world supplies are fundamentally bearish for prices, he said.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at the October low of US$4.59, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.38, he said.

 

First resistance is anticipated at Tuesday's high of US$5.00 1/2 and then at this week's high of US$5.04, the analyst said. First support lies at Tuesday's low of US$4.91 1/2 and then at last week's low of US$4.85 1/4, he said.

 

Recent sell-offs have improved export demand for U.S. wheat, but "large amounts will need to be exported to catch up to" the U.S. Department of Agricultures' target for the year of 825 million bushels, Country Hedging said in a note. Weekly U.S. wheat export sales for the week ended Jan. 14 were impressive at a marketing-year high, but the U.S. still faces stiff competition for business from other countries.

 

Traders are waiting to see the results of a tender from Egypt's state-owned General Authority for Supply Commodities. Egypt, a major wheat buyer on the world market, is known for being price sensitive.

 

GASC said it is seeking to buy 55,000 to 60,000 tonnes of U.S. soft red wheat, U.S. soft white wheat and U.S. hard red wheat. It also is looking for 60,000 tonnes of Australian, German, Argentinean, Kazakh, Russian or French wheat.

 

"It's expected that GASC will secure Russian, French or Kazakh wheat, at FOB prices well below the U.S.," AgResource Co. said in a note.

 

Trading executives said Wednesday that large volumes of Kazakh-origin wheat are likely to be offered and bought during Egypt's import tenders over the next few months. Kazakhstan is trying to bring down surging inventories, they said.

 

In other news, widespread snowfall in Oklahoma and Texas should bring beneficial moisture to dormant hard red winter wheat, an analyst said. In the Midwest, temperatures will not be cold enough to harm dormant soft red winter wheat, according to private weather firm DTN Meteorlogix.