February 20, 2007

 

US Wheat Outlook on Tuesday: Flat to down 1 cent on profit taking

 

 

U.S. wheat futures are forecast to start Tuesday's day session flat-to-1 cent lower as profit taking after Friday's rally in the absence of fresh news is expected to weigh on prices at the opening, sources said.

 

In overnight electronic trading, CBOT March wheat fell 1 1/4 cents to US$4.66 3/4 per bushel, while March KCBT hard red wheat ended unchanged at US$4.95 1/2.

 

There is not much fresh news out so wheat will take its direction from the other markets, a commission house analyst said. Wheat is short-term overbought after Friday's rally and could see a some profit taking as the news out over the weekend was not positive for price direction, he added.

 

Wheat trading is dependent upon other markets for direction and that should continue Tuesday though trading is expected to be choppy, a floor trader said. Energy and metals are weaker and that could weigh on buyers, he added.

 

Large commercial traders reduced their long CBOT wheat futures and options on futures positions by 8,421 contracts and trimmed their short positions by 372 contracts and are now overall net short 157,950 contracts, the Commodity Futures Trading Commission reported Friday.

 

Large non-commercial traders increased their long holdings by 3,288 contracts and cut their short positions by 2,130 contracts and are now net short 10,771 futures and options on futures contracts.

 

At the KCBT, large non-commercial traders trimmed their long positions by 634 contracts and added 154 contracts to their short positions and are now net long 21,210 futures and options on futures contracts.

 

In the U.S. Midwest soft red winter wheat belt, mainly dry conditions with only a few light sprinkles are expected Wednesday and Thursday in the west with mainly dry weather in the east Wednesday, DTN Meteorologix Weather said. Temperatures are expected to average near-to-above normal in the period.

 

In the U.S. hard red winter wheat belt, mainly dry weather is forecast through Thursday in the region and temperatures are expected to average above-to-much above normal in the period, DTN Meteorologix Weather said.

 

On daily open auction technical charts, CBOT May wheat closed at the weekly high close on short covering and fresh speculative buying, a technical analyst said. The bulls' next upside objective is closing prices above solid resistance at US$4.85 per bushel. The next downside objective is closing prices below solid support at the January low of US$4.58 1/2 per bushel, the analyst said.

 

First resistance for CBOT May is seen at US$4.85 and then at US$4.90. First support is at US$4.75, and then at US$4.70.

 

May KCBT hit a fresh four-week high and the bulls have regained near-term technical momentum, the analyst said.

 

First resistance for KCBT May is seen at Friday's high of US$5.08 and then at US$5.10. First support is seen at US$5.03 and then at US$5.00.

 

In other wheat news, Ukraine forecast its wheat harvest at 17.8 million metric tonnes in 2007, up 27.2% from the 13.994 million tonnes harvested in 2006, the Agriculture Ministry announced Tuesday.

 

India's wheat crop may exceed the government's current forecast of 72.5 million metric tonnes buoyed by favorable weather conditions, India's Agriculture Minister said.

 

In 2006, India produced 69.48 million tonnes.

 

Japan's Ministry of Agriculture, Forestry and Fisheries is seeking 120,000 metric tonnes of wheat in a tender to be concluded Thursday, a ministry official said Tuesday. 70,000 metric tonnes is expected to be of U.S. origin.

 

Sources said Iraq is seeking 100,000 metric tonnes of U.S. or Canadian wheat.