February 11, 2008

 

US Wheat Outlook on Monday: Sharply higher following expanded limits

 

 

U.S. wheat futures are poised to start Monday's day session sharply higher after the exchanges raised daily trading limits during the weekend, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 50 to 60 cents per bushel higher. In overnight electronic trading, CBOT March wheat ended up 55 cents at US$11.48.

 

The CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange raised the daily trading limit for wheat to 60 cents from 30 cents effective Sunday. KCBT and MGE March wheat surged 60 cents higher in overnight trading and are called to open 60 cents higher.

 

The exchanges asked the Commodity Futures Trading Commission to approve the expanded limits following a series of limit-up closes last week. MGE remains the leader of the rally in wheat amid strong demand for high-protein spring wheat, traded at the exchange, and tight supplies, traders said.

 

"Chicago wheat has been boosted by a powerful rally in Minneapolis wheat futures," a technical analyst said. "Minneapolis wheat again locked up the limit. All wheat markets should continue to watch the Minneapolis wheat futures market."

 

All three exchanges set new record highs in the overnight electronic session. CBOT March wheat traded as high as US$11.53, while CBOT May wheat soared as high as US$11.69 3/4. MGE March wheat overnight hit a high of US$16.13.

 

"It's all about the money flows," a CBOT floor trader said.

 

Global wheat also hit record highs. Nearby Paris milling wheat reached a new all-time high of EUR 295 per tonne on global supply tightness. The new high replaced the previous top set last September of EUR 285 per tonne.

 

Australia's prompt wheat contract - ASX March 2008 - traded as high as AUS$504 a metric tonne, which was also the highest price set Friday for the prompt contract, before settling at AUS$500. The previous prompt contract that expired Jan. 17 settled at AUS$440/tonne. ASX July 2008 traded up to a record AUS$550/tonne before settling at AUS$540/tonne Monday.

 

CBOT wheat bulls' next upside price objective is to push and close the March contract above psychological resistance at US$11.00, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$10.50. First resistance is seen at US$11.00 and then at US$11.23. First support lies at US$10.73 and then at US$10.50.

 

At the KCBT, the bulls' next upside price objective is pushing and closing March wheat above psychological resistance at US$12.00, the analyst said. The bears' next downside objective is pushing prices below psychological support at US$11.00. First resistance is seen at US$11.50 and then at US$11.70 1/4. First support is seen at US$11.25 and then at US$11.00.

 

In other news, Ukraine is likely to harvest 19.5 million metric tonnes of wheat in 2008, compared with 13.5 million tonnes in 2007, the leading national agrarian markets analyst APK-Inform said in a report. Winter wheat harvest is forecast to increase to 18.6 million tonnes from 12.7 million tonnes in 2007 due to increase in planted area to 6.3 million hectares from 5.55 million hectares in 2007.

 

Spring wheat harvest is forecast to increase to 861,000 tonnes from 720,000 tonnes in 2007 due to increased average yield, to 2.18 tonnes/ha from 1.8 tonnes/ha in 2007. The planted area will decrease to 410,000 ha from 720,000 ha in 2007.