February 13, 2008

 

US Wheat Outlook 0n Wednesday: Seen mostly lower as markets correct

 

 

U.S. wheat futures are expected to start Wednesday's day session mostly lower as the markets continue to pull back from high prices, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 19 to 25 cents per bushel lower. In overnight electronic trading, CBOT March wheat ended down 19 cents at US$9.88. Kansas City Board of Trade March wheat overnight fell 19 cents to US$10.26 1/2, while Minneapolis Grain Exchange March wheat rose 23 cents to US$16.96.

 

Most wheat futures ended sharply lower Tuesday and the markets have more room to correct after a recent run-up to record highs, traders said. There was not much fresh supportive news out overnight, they said.

 

The wheat markets lately have been focusing on strength in MGE March wheat, which has closed limit up for the past nine day sessions. With the nearby MGE contract trading freely overnight, CBOT and KCBT wheat may feel some pressure, traders said.

 

But MGE March wheat is not expected to see too much of a setback as Japan said Tuesday it was seeking 190,000 metric tonnes of wheat, including 77,000 tonnes of U.S. dark northern spring wheat. The MGE has been leading the upswing in wheat recent amid strong demand for high-protein spring wheat, traded at the exchange, and short supplies.

 

The daily trading limits for KCBT and MGE wheat futures is now 90 Cents, while the daily trading limit at the CBOT remains 60 cents. KCBT and MGE daily price limits will revert back to 60 cents after no wheat futures contract month closes limit bid or limit offer for three consecutive business days, according to the exchanges.

 

Traders should not have too much difficulty with the uneven limits between the CBOT and KCBT and between the CBOT and MGE, a CBOT floor trader said. It seems as though the markets are "trading in their own worlds" and there is not too much inter-market spreading he said.

 

CBOT wheat bulls' next upside price objective is to push and close July futures prices above resistance at the contract high of US$10.00, a technical analyst said. The next downside price objective for the bears is pushing prices below psychological support at US$9.00 a bushel. First resistance is seen at US$9.50 and then at Tuesday's high of US$9.69. First support lies at Tuesday's low of US$9.19 and then at US$9.12.

 

At the KCBT, the bulls' next upside price objective is pushing and closing July wheat above resistance at Tuesday's high of US$10.57, the technical analyst said. The bears' next downside objective is pushing prices below psychological support at US$10.00, he said. First resistance is seen at US$10.31 and then at US$10.50. First support is seen at US$10.00 and then at US$9.89 1/2.

 

In other news, India won't have to import wheat at least until July because the government has adequate stocks, the country's commerce secretary said. The government hopes wheat stocks as of April 1 will be around 4.6 million tonnes, compared to the usual requirement of 4 million tonnes, he said.

 

A decision on whether India needs to import wheat will be taken only after assessing actual production in 2008-09 and government procurement volumes, the secretary said. India contracted to import around 1.8 million tonnes of wheat in 2007 to shore up its buffer stocks.