January 29, 2008

 

US Wheat Outlook on Tuesday: Higher start seen as MGE rally rolls on

 

 

U.S. wheat futures are expected to start Tuesday's day session higher after the nearby Minneapolis Grain Exchange contract overnight sailed to a new high above US$13 per bushel, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 10 to 15 cents per bushel higher. In overnight electronic trading, CBOT March wheat jumped 13 1/2 cents to US$9.76 1/2.

 

Kansas City Board of Trade March wheat overnight climbed 16 3/4 cents to US$10.16 3/4. MGE March wheat closed limit up, 30 cents higher, at a new all-time high of US$13.27.

 

MGE spring wheat futures are surging on strong demand, tight supplies and in an effort to secure spring wheat acres for planting in the Northern Plains, a CBOT floor analyst said. The wheat markets are making history, with the nearby MGE contract breaking above the landmark level of US$13 for the first time, he said.

 

MGE wheat futures should remain the leader of CBOT and KCBT wheat, traders said. The markets all have upside momentum following recent rallies, they said.

 

CBOT wheat bulls have the near-term technical advantage and gained fresh power Monday after the March contract closed limit up at US$9.63, a technical analyst said. It is important to remember, however, that three previous rallies were stopped between the US$9.66 1/2 and US$10.09 1/2, he said.

 

"It will be important for all wheat futures traders to keep a close eye on the Minneapolis wheat futures market," the analyst said. "That market is leading the recent upswing, and it will likely lead the next downswing in prices."

 

At the KCBT, March wheat also closed limit up Monday, settling at US$10. Bulls have regained solid upside technical power at the KCBT, the analyst said.

 

Bulls' next upside price objective is pushing and closing KCBT March wheat above solid resistance at US$10.33, the analyst said. The bears' next downside objective is pushing prices below solid support at US$9.66. First resistance is seen at US$10.11 1/2 and then at US$10.20. First support is seen at US$9.90 and then at Monday's low of US$9.76.

 

In other news, Brazil's National Foreign Trade Council was set to meet Tuesday to discuss the possible removal of a 10% wheat import tax. Wheat milling companies have been pressuring the government for more than six months to remove the tax ever since Argentina closed its doors to new wheat exports.

 

China, meanwhile, will transfer 500,000 tonnes of wheat from Henan province to the northwestern region to guarantee wheat supply in the markets there, officials said.

 

Japan is seeking a maximum of 17,000 tonnes feed wheat and 241,000 metric tonnes of feed barley and in a simultaneous buy-sell, or SBS, tender to be concluded Feb. 13, a ministry official said Tuesday. The wheat and barley are expected to be shipped between Feb. 13 and May 31.

 

Under the SBS system, the ministry floats periodic tenders that simultaneously identify the price at which the ministry can buy a product from an importer and sell the product to an end-user. Bids with the highest markup - or difference between the price that the ministry will pay and the price that the ministry will receive - get preference.