February 7, 2007

 

US Wheat Outlook on Wednesday: 2-3 cents higher on e-CBOT, position squaring

 

 

U.S. wheat futures are expected to start Wednesday's day session activity 2 to 3 cents higher as modest gains in overnight activity and position squaring after recent weakness and ahead of Friday's U.S. Department of Agriculture reports are expected to supply support to prices, sources said.

 

In overnight electronic trading, CBOT March wheat rose 2 1/2 cents to US$4.53 1/2, while March KCBT hard red wheat gained 1 3/4 cents to US$4.78 1/4.

 

The market was higher overnight and Egypt bought wheat overnight, which was supportive, a floor source said. In addition, there is a USDA report out Friday, and there could be some position squaring ahead of it, they added.

 

Egypt's General Authority for Supply Commodities, GASC bought 270,000 metric tonnes of wheat in a tender concluded Wednesday. Included in the total was 85,000 metric tonnes of U.S. soft red winter wheat, with 125,000 tonnes Russian wheat and 60,000 tonnes Kazakhstan wheat.

 

U.S. wheat is competitive in world export markets, but there is ample wheat around, a floor broker said.

 

In a Dow Jones Newswire survey, the average of 12 analysts surveyed pegged U.S. 2006-07 wheat ending stocks at 474 million bushels, 2 million more than the 472 million estimated in January and below the 571 million for the 2005-06 crop.

 

Wheat has been struggling, but the market could see some support from short covering but if corn is weaker wheat could follow, the broker added.

 

Wednesday is expected to be the first day of the "Goldman roll," buying May wheat and selling nearby March.

 

On daily technical charts, CBOT March wheat settled near the session low and hit a 4-week low. The next downside objective is closing prices below solid support at the January low of US$4.47 1/2 per bushel, a technical analyst said. The next upside objective is to close prices above solid resistance at US$4.70.

 

First resistance for CBOT March is seen at US$4.55 and then at US$4.60.First support is pegged at Tuesday's low of US$4.50 and then at US$4.47 1/2.

 

March KCBT wheat traded an "outside day" down on daily technical charts and closed at a fresh four-week low, the analyst said. The bulls' next upside objective is closing prices above resistance at US$5.00 per bushel, with the bears' downside objective closing prices below last week's low of US$4.74

 

He sees first resistance for KCBT March at US$4.82 and then at US$4.85. First support is seen at US$4.76 and then at US$4.74.

 

In the U.S. Midwest soft red wheat growing area there is a chance for a little light snow or flurries in the west with mostly dry conditions in the eastern portion of the region through Friday, DTN Meteorologix Weather said. Temperatures are forecast to average below or much below normal.

 

In the U.S. hard red winter wheat belt, dry conditions with only a little light snow is possible in the northern sections through Friday, DTN Meteorologix said. Temperatures are forecast to average near to below normal Thursday and Friday.

 

In other wheat news, prices for wheat delivered to Asia may decline for the rest of the week as Asian sources expect U.S. futures prices to decline on the lack of export demand for U.S. wheat.