February 8, 2006

 

US Wheat Outlook on Wednesday:Down 2-4 cents on follow through, e-CBOT

 

 

Wheat futures at the Chicago Board of Trade are forecast to begin open auction trading Wednesday 2-4 cents lower as lower prices overnight and follow through selling from Tuesday's weak close are expected to weigh on prices, floor sources said.

 

In overnight e-CBOT trading, March wheat fell 2 3/4 cents to $3.49 per bushel, May wheat declined 3 1/4 cents to $3.60, and July also fell 3 1/4 cents to $3.69 3/4.

 

Overnight at the KCBT, March wheat fell 3 1/2 cents to $4.09 1/2 per bushel and May fell 4 1/2 cents to $4.13 1/2.

 

Outside markets are lower this morning extending Tuesday's weakness and that is not positive, a floor analyst said. In addition, there is a USDA report out Thursday and that might limit buying activity today, he added.

 

Precious metals, crude oil and cocoa were all trading lower Wednesday morning.

 

Market direction will depend upon what the funds want to do after Tuesday's losses in outside markets, the analyst said.

 

Thursday, the U.S. Department of Agriculture is scheduled to release the February supply and demand report at 7:30 a.m. CST (1330 GMT).

 

The average estimate of 11 analysts surveyed by Dow Jones Newswires pegged US wheat ending stocks at 536 million bushels, down 6 million bushels from the USDA's January estimate.

 

The rolling out of March into May was evident in Chicago wheat Tuesday, a floor trader said.

 

According to preliminary volume released by the CBOT, almost 20,000 March contracts were rolled out of spot-month March with May gaining almost 20,000 new positions.

 

In addition, Tuesday's trading volume was the fifth highest on record based on preliminary volume, with open interest setting another record for in Chicago at over 374,000 contracts.

 

Mainly dry conditions are forecast over the next several days in the South-Central Plains, according to DTN Meteorlogix weather. Temperatures are expected to average near to above normal Wednesday to below normal Friday.

 

On technical charts, the next upside objective for CBOT March is the September 2005 high of $3.65, with a close below $3.45 providing the bears with fresh downside technical momentum, a technical analyst said. First resistance is pegged at $3.55, then at $3.58 3/4, Tuesday's high and then at $3.61 1/2, last week's high. First support is seen at $3.50, and then at $3.47.

 

For March KCBT, Tuesday's new contract high of $4.22 1/2 now becomes strong overhead resistance for the bulls to overcome, a technical analyst said. A close below solid support at $4.00 would provide bears with fresh downside technical momentum. First resistance is pegged at $4.20 and then at $4.22 1/2. First support is seen at this week's low of $4.11 and then at $4.05.

 

Cash wheat basis bids were unchanged to mixed Wednesday morning. Soft red wheat basis bids were unchanged to lower with Evansville, Ind. 3 cents lower at 2 cents over CBOT March.

 

Hard red winter wheat basis bids were mostly unchanged with Manhattan, Kansas unchanged at 13 cents under KCBT March wheat.

 

Spring wheat basis bids were mostly unchanged as well with Minot, N.D. unchanged at 24 cents under MGE March futures.

 

In global wheat news, Iraq has yet to announce the details of its tender for up to 1 million tonnes of optional origin wheat. The announcement was to be released sometime Wednesday after being delayed previously.