February 6, 2008

 

US Wheat Outlook on Wednesday: Limit up on follow-through, surging MGE

 

 

U.S. wheat futures are expected to start Wednesday's day session limit up, or 30 cents higher, on follow-through buying from record overnight highs and amid bullishness about demand, traders said.

 

In overnight electronic trading, Chicago Board of Trade March wheat soared limit up to US$10.33 per bushel. Kansas City Board of Trade March wheat surged 30 cents higher to US$10.80 1/4, Minneapolis Grain Exchange March wheat jumped 30 cents to US$14.93.

 

Surging MGE spring wheat futures should continue to lead CBOT and KCBT wheat higher, traders said. Solid demand for spring wheat and tight supplies have pushed MGE March wheat higher than any other wheat contract ever traded on a U.S. exchange. The contract is now up more than US$4.50 since the beginning of the year.

 

MGE March wheat been stuck at limit up in string of sessions, leaving market participants unable to trade. In response, the MGE has said it will raise its daily trading limit to 40 cents from 30 cents starting with the evening session that begins Feb. 11. Some traders at the MGE are stuck holding short positions in the nearby March contract, an analyst said.

 

Along with the strong leadership from the MGE, there is support for U.S. wheat futures from an Egyptian purchase of wheat. Egypt's state-owned General Authority for Supply Commodities bought 150,000 tonnes of Russian, Kazakh and U.S. soft red winter wheat.

 

GASC announced it was tendering for wheat after the limit-up close Tuesday. The move was seen by some as a bullish signal because Egypt, considered a savvy wheat buyer on the world market, typically tries to buy on price breaks, an analyst said.

 

In other news, Syria's state-owned General Establishment for Cereal Processing and Trade, or Hoboob, said it signed an agreement with Egypt's state-owned Food Industries Holding Co. to exchange Syrian wheat for Egyptian rice. Syria will exchange 176,000 metric tonnes of milling wheat to Egypt while Egypt will give 102,000 tonnes of rice in shipments set to start Feb. 20.

 

In Russia, meanwhile, grain stocks on Jan. 1 totaled 29.92 million tonnes, down 5.1% from the same date last year, the federal statistics service said. Stocks held by farmers were 18.85 million tonnes, 2.3% more than a year earlier, while grain processing and storage enterprises held a total of 11.09 million tonnes of grain, 15.5% less than a year ago.

 

U.S. winter wheat may see some moisture during the next several days, forecasters said. In the central and southern Plains, there is a chance for significant precipitation in parts of Texas and Oklahoma but little wetness headed for the western Kansas region, DTN Meteorlogix said.

 

In the eastern Midwest and Delta, rain may change to snow before ending Wednesday. Colder weather is on tap for the weekend and on Monday before it warms again Tuesday.

 

CBOT wheat bulls' next upside price objective is to push and close the March contract above strong technical resistance at the contract high of US$10.09 1/2, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$9.73, which would fill on the downside Tuesday's upside price gap on the daily bar chart, he said.

 

First resistance is seen at US$10.09 1/2 and then at US$10.20. First support lies at US$9.92 1/2 and then at Tuesday's low of US$9.83.

 

At the KCBT, bulls' next upside price objective is pushing and closing March wheat above technical resistance at US$10.75, the analyst said. The bears' next downside objective is pushing prices below solid support at Monday's high of US$10.20 1/4, which would fill on the downside Tuesday's upside price gap on the daily chart.

 

First resistance is seen at US$10.33 and then at US$10.50. First support is seen at Tuesday's low of US$10.03 and then at US$9.97 1/4.