February 12, 2008

 

US Wheat Outlook on Tuesday: Mixed start; MGE march rally continues

 

 

U.S. wheat futures are called to start Tuesday's day session mixed following mixed activity overnight.

 

In overnight electronic trading, Chicago Board of Trade March wheat rose 2 1/4 cents to US$10.50 1/4 per bushel. Kansas City Board of Trade March wheat overnight jumped 15 1/2 cents to US$10.99 1/4. Minneapolis Grain Exchange March wheat ended limit up, 60 cents higher, at US$16.73, a new record price for wheat traded on a U.S. exchange. However, the deferred months on all three exchanges were weaker.

 

MGE March wheat has closed limit up for the past eight day sessions and the strong gains overnight boosted nearby CBOT and KCBT wheat, traders said. MGE March wheat continues to climb amid steady demand for high-protein spring wheat, traded at the exchange, and fears about the potential for exhausting supplies.

 

Japan said Tuesday it is seeking 190,000 metric tonnes of wheat, including 77,000 tonnes of U.S. dark northern spring wheat and 38,000 tonnes of U.S. semi hard wheat, in a tender to be concluded Thursday. The tender will help keep a solid bid under MGE March wheat as supplies of high-quality spring wheat are tight, a CBOT floor trader said. The shipment to Japan is expected to arrive in May and June, and the next U.S. spring wheat crop won't be harvested until summer.

 

Egypt's state-owned General Authority for Supply Commodities, meanwhile, said it cancelled a tender to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment from March 11 to March 31, on a free-on-board basis. The tender was issued after the end of the day session Monday.

 

In other news, Iraq is facing a wheat shortage this year and has only enough stocks for three to six months, the country's deputy trade minister has said. Iraqi trade officials said earlier this year that Iraq needs to buy up to 4.5 million metric tonnes of wheat, up from 2.7 million tonnes in 2007.

 

Looking at technical charts, it seems as though CBOT wheat is close to a top, a market technician said. The market Monday ended sharply lower after the CBOT, KCBT and MGE increased margins and pushed daily trading limits for wheat to 60 cents from 30 cents.

 

"It's my bias that as soon as nearby Minneapolis wheat starts to trade and some of the trapped shorts get out of the market, then a top will likely be scored in Minneapolis, and also Chicago and Kansas City wheat," the market technician said. "All wheat markets should continue to watch the Minneapolis wheat futures market."

 

CBOT wheat bulls' next upside price objective is to push and close the new-crop July future above resistance at Monday's contract high of US$10.00, the technician said. The next downside price objective for the bears is pushing prices below technical support at US$9.34 1/2, which would fill on the downside an upside price gap on the daily bar chart, he said.

 

First resistance is seen at US$10.00 and then at US$10.25. First support lies at US$9.66 and then at Monday's low of US$9.50.