February 10, 2006

 

US Wheat Outlook on Friday: Lower, following e-CBOT, outside markets

 

 

Wheat futures at the Chicago Board of Trade are forecast to begin open outcry trading 3-5 cents lower Friday, following weaker prices overnight, declines in outside markets and ideas recent gains were overdone, floor sources said.

 

In overnight e-CBOT trading, March wheat fell 4 1/2 cents to $3.58 3/4 per bushel, May wheat declined 3 cents to $3.71 3/4, and July fell 2 1/2 cents to $3.81 1/2.

 

Overnight at the KCBT, March wheat fell 4 cents to $4.29 3/4 per bushel.

 

Overnight prices were weaker, precious metals markets are lower, and the CBOT raised margins on wheat, so all the news out so far is negative, a floor trader said.

 

However, it all depends on what the funds do. If they decide to buy as much as they did yesterday, it will be hard for the market to go lower, if not there might be some profit taking, he said.

 

Thursday, commodity fund buying was estimated at over 12,000 contracts with much of the buying late in the session, sources said.

 

On technical charts, bulls still have solid near-term technical momentum, with the bulls next upside price objective the July high of $3.81, with a close below $3.45 providing bears with fresh downside technical momentum, a technical analyst said. First resistance is seen at $3.65, Thursday's high and then at $3.70. First support is seen at $3.50, and then at $3.47 1/2.

 

For March KCBT, the next major longer-term upside price objective is the 2002 high of $4.91, basis nearby futures, the analyst said. It will take a close below $4.10 to provide downside technical momentum. He sees first resistance Thursday's high of $4.36 and then at $4.40. First support is pegged at $4.30 and then at $4.25, Thursday's low.

 

Artic cold weather, which could cause stressful conditions to the winter wheat crop in the Southern Plains is forecast this weekend, DTN Meteorlogix weather said. Temperatures expected in the single digits above zero Fahrenheit are likely in northern Kansas and southwestern Nebraska by Saturday. These cold temperatures offer the potential for winterkill damage to wheat affected by the lack of snow cover and very warm temperatures in January, Meteorlogix weather said. Mostly dry weather is forecast for the region next week following the cold air, Meteorlogix said.

 

Cash wheat basis bids were unchanged to lower Friday morning. Soft red wheat basis bids were unchanged to lower with Evansville, Ind., 2 cents lower at 7 cents under CBOT March.

 

Hard red winter wheat basis bids were mostly unchanged with Manhattan, Kansas, unchanged at 15 cents under KCBT March wheat.

 

Spring wheat basis bids were mostly unchanged with Minot, N.D., 1 cent lower at 25 cents under MGE March futures.

 

Based on preliminary volume and open interest data released by the CBOT, wheat futures set another all-time open interest record Thursday with volume the third highest on record.

 

In global wheat news, India's State Trading Corp. has called for a tender to import 500,000 metric tonnes of wheat, with at least 250,000-300,000 metric tonnes to arrive by April, according to its web site. This is the first time in six years that India in importing wheat.

 

According to Indian government estimates, India's wheat production in 2006 is estimated at 73.1 million metric tonnes versus 72 million last year.

 

Korea Flour Milling Co passed on its tender to buy 25,200 metric tonnes of U.S. No. 1 wheat because offer prices were too high, sources said.

 

Ukraine will increase its spring grain planted are in the current year by 1.5 million hectares to 9.2 million hectares to make up for the damage by cold weather to winter grains, according to market analyst APK-Inform, quoting the Agriculture Ministry.