January 31, 2008

 

US Wheat Outlook on Thursday: Mixed after inter-market spreads unwind

 

 

U.S. wheat futures are expected to start Thursday's day session mixed following mixed activity overnight, traders said.

 

In overnight electronic trading, Chicago Board of Trade March wheat was up 1 3/4 cents at US$9.24 1/4 pre bushel. Kansas City Board of Trade March wheat was up 3 cents at US$9.70, and Minneapolis Grain Exchange March wheat was down 9 1/2 cents at US$13.33 1/2.

 

MGE March wheat recently ended limit up, or 30 cents higher, for several consecutive day sessions amid strong demand for spring wheat and tight supplies. Now that the contract is trading off limit bid, traders are beginning to unwind MGE vs. CBOT and KCBT inter-market spreads, an analyst said.

 

The markets should feel some support from solid weekly U.S. wheat export sales, an analyst said. Total export sales for the week ended Jan. 24, including old crop and new crop business, were 588,800 metric tonnes, according to the U.S. Department of Agriculture. Estimates had called for sales of 300,000 to 700,000 tonnes.

 

Thirty-four weeks into the 2007-08 marketing year, total commitments are now 96% of the USDA's target for the year. Commitments are up 66% from a year ago, and outstanding sales are up 86%, the USDA said.

 

New sales of wheat for delivery in 2007-08 were 696,700 tonnes and cancellations were 187,900 tonnes, leaving net old crop sales at 508,800 tonnes, according to the USDA. That was 20% above the previous week and 79% above the prior four-week average, the USDA said.

 

Top buyers of old crop wheat included Japan, which booked 138,200 tonnes; Mexico, which bought 81,900 tonnes; and Thailand, which bought 80,500 tonnes. Net sales of 80,000 tonnes for delivery in 2008-09 were for the Philippines, which bought 75,000 tonnes, and unknown destinations, which took 5,000 tonnes, the USDA 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 US$9.00, he said.

 

First resistance is seen at US$9.40 and then at Wednesday's high of US$9.44. First support lies at Wednesday's low of US$9.20 and then at US$9.10.

 

At the KCBT, a bearish double-top reversal pattern may be forming on the daily bar chart, the technical analyst said. The bulls' next upside price objective is pushing and closing KCBT March wheat above major psychological resistance at US$10.00, he said. The bears' next downside objective is pushing prices below solid support at US$9.46.

 

First resistance is seen at US$9.80 and then at Wednesday's high of US$9.87. First support is seen at Wednesday's low of US$9.65 and then at US$9.60.

 

In winter wheat areas of the eastern Midwest and Delta, episodes of precipitation are possible, DTN Meteorlogix said. However, conditions will not be very cold during the next five to seven days, the private weather firm said.

 

Some precipitation is possible Thursday in the central and southern Plains through south-central Kansas and north-central Oklahoma, DTN Meteorlogix said. Long range charts today appear to be drier and without any significant cold weather, the firm said.

 

In other news, Syria's state-owned General Establishment for Cereal Processing and Trade, or Hoboob, said it was in talks with Egypt's state-owned Food Industries Holding Co. to exchange Syrian wheat for Egyptian rice. Syria is looking to send 176,000 metric tonnes of milling wheat to Egypt while Egypt will give 102,000 tonnes of rice, according to a senior importer at Hoboob.

 

Wheat lands in Western Australia, meanwhile, face at least average rains through to October when the annual harvest usually begins, according to an outlook from the state's Department of Agriculture & Food. Western Australia is a major area supplying the global wheat market.