February 19, 2008

 

US Wheat Outlook on Tuesday: Seen firmer follow-through, tightness

 

 

U.S. wheat futures are expected to start Tuesday's day session firmer on follow-through buying from the overnight and amid ongoing concerns about tight spring wheat supplies, traders said.

 

Stronger outside and neighboring markets should help support prices, they said.

 

Benchmark Chicago Board of Trade March wheat is called to open 10 to 15 cents per bushel higher. In overnight electronic trading, CBOT March wheat jumped 11 cents to US$10.38 1/2.

 

Kansas City Board of Trade March wheat overnight rose 12 cents to US$10.94. Minneapolis Grain Exchange March wheat closed up 15 cents at US$19.50.

 

Fears about tight supplies of spring wheat, traded at the MGE, should continue to propel prices, traders said. Japan said overnight it is seeking 151,000 metric tonnes of wheat, including 68,000 tonnes of U.S. dark northern spring wheat, in a tender to be concluded Thursday. The entire shipment is expected to arrive April 11 through June 10.

 

There also is market chatter that Iraq bought 50,000 tonnes of U.S. hard red winter wheat, traded at the KCBT, a CBOT floor chatter said. Iraq bought the wheat at US$420 FOB for end of March to April shipment in its first purchase since last October, according to a media report.

 

"The world situation is still tight, and there's still a lot of demand out there for wheat," a CBOT floor trader said.

 

There was talk that beneficial rains fell during the weekend in the U.S. Northern Plains, traders said. However, that shouldn't be seen as too bearish for wheat because the markets are still caught up in an old-crop supply story, a trader said.

 

The probability of additional beneficial rains for key wheat areas of the Plains looks less Tuesday than it did Monday, DTN Meteorlogix the private weather firm said it has taken out of the six-to-10 day forecast for the western areas.

 

An official forecast of Australia's 2007-08 wheat crop, meanwhile, was increased to 13.1 million metric tonnes, from a December estimate of 12.7 million tonnes. That adjustment shouldn't weigh on prices much either because the wheat should be quickly consumed by Asian countries, a trader said.

 

"It's no big deal," a CBOT floor trader said.

 

Strength in the neighboring CBOT soy markets should help U.S. wheat futures advance, a trader said. CBOT soybeans overnight soared to new all-time highs amid lingering ideas that China may increase imports of soybeans and soyoil, analysts said. Firmer metals and crude oil futures also shoulder provide some spillover strength to the grains, the trader said.

 

CBOT wheat bulls' next upside price objective is to push and close the July contract above resistance at Friday's high of US$9.54, a technical analyst said. The next downside objective for the bears is pushing prices below solid support at US$9.16, which would fill on the downside an upside price gap on the daily bar chart, he said.

 

First resistance is seen at US$9.54 and then at US$9.66. First support lies at US$9.30 and then at Friday's low of US$9.23.

 

At the KCBT, bulls' next upside price objective is pushing prices above resistance at US$10.50, the analyst said. The bears' next downside objective is pushing prices below solid support at US$9.88, to fill on the downside an upside price gap on the daily chart.

 

First resistance is seen at Friday's high of US$10.25 and then at US$10.40. First support is seen at US$10.00 and then at US$9.88.