January 28, 2008

 

US Wheat Outlook on Monday: Firmer as MGE trades limit up overnight

 

 

U.S. wheat futures are expected to start Monday's day session firmer, with strength at the Minneapolis Grain Exchange continuing to pull other markets higher, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 5 to 7 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 6 1/2 cents to US$9.39 1/2.

 

MGE March wheat overnight finished limit up, or 30 cents higher, after closing limit up Friday. The contract set a new all-time high of US$12.97 in the overnight electronic trade. That is the highest price ever for a wheat contract at a U.S. exchange.

 

Surging prices at the MGE will pull CBOT and Kansas City Board of Trade prices higher, traders said. MGE is rallying on strong demand and concerns about low spring wheat supplies, they said.

 

However, CBOT wheat will also likely feel some pressure from weakness in the neighboring CBOT corn and soybean markets, a CBOT floor broker said. CBOT wheat will get a little "trapped in the middle" as CBOT corn and soybeans were lower in the overnight trading session, he said.

 

There was not much fresh fundamental news out during the weekend for the wheat markets, traders said. Activity in the wheat markets will likely stay volatile at high prices levels, they said.

 

CBOT bulls' next upside price objective is to push and close March wheat above strong technical resistance at US$9.50, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at last week's low of US$9.02, he said.

 

First resistance is seen at Friday's high of US$9.38 and then at US$9.50. First support lies at US$9.25 and then at Friday's low of US$9.15.

 

At the KCBT, bulls' next upside price objective is pushing and closing prices above major psychological resistance at US$10.00, the technical analyst said. The bears' next downside objective is pushing prices below solid support at last week's low of US$9.46.

 

First resistance is seen at Friday's high of US$9.78 and then at US$9.88. First support is seen at Friday's low of US$9.60 and then at US$9.50.

 

There are no major weather threats for the markets to focus on right now, a trader said. Possible damage from winterkill in the U.S. remains a concern, but any impact won't be known until spring, he said.

 

In soft red winter wheat areas of the U.S. eastern Midwest and Delta, there are "no significant cold weather threats" this week, DTN Meteorlogix said. No significant precipitation or cold weather is expected in hard red winter wheat areas of the central and southern Plains either, the private weather firm said.

 

Temperatures in wheat areas of the Ukraine may drop below normal in the next week, but conditions won't get cold enough to cause concerns for wheat, Meteorlogix said.

 

In China, a major snow, ice and rain system hit southern wheat areas during the weekend, Meteorlogix said. The crop will eventually benefit from the moisture, unless the ice and snow smother the crops, which would contribute to winterkill, the firm said.