February 20, 2008

 

US Wheat Outlook on Wednesday: Profit-taking pressure is expected

 

 

Profit-taking is expected to weigh on U.S. wheat futures at the start of Wednesday's day session, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT May wheat slipped 3 1/2 cents to US$10.44.

 

Kansas City Board of Trade May wheat overnight fell 2 1/4 cents to US$10.83. Minneapolis Grain Exchange May wheat slid 2 3/4 cents to US$15.44 3/4.

 

CBOT and KCBT wheat look as though they will give back some gains made Tuesday on the back of strength in the CBOT soy complex and outside markets, traders said. There was not much fresh news out, and there is room for the markets to pull back from high prices, they said.

 

Nearby MGE March wheat closed down 75 cents Tuesday, and another day of sharp losses could pressure the other wheat markets, a technical analyst said. MGE spring wheat futures recently led a rally to record highs, with the front-month contract hitting a high of US$19.88 last week.

 

"If the Minneapolis wheat futures market continues to back off, the Chicago and Kansas City markets will likely be in trouble," the technical analyst said.

 

The daily trading limit for wheat futures at the MGE remains US$1.35, while the daily limit is 60 cents at the CBOT and KCBT. MGE's limit should drop to 60 cents Thursday if two contracts within the same crop year don't close at limit bid or limit offer Wednesday.

 

CBOT wheat bulls' next upside price objective is to push and close the new-crop July contract above resistance at US$9.83 1/2, the analyst said. The next downside price objective for the bears is pushing prices below solid support at US$9.34 1/2.

 

First resistance is seen at Tuesday's high of US$9.66 and then at US$9.83 1/2. First support lies at Tuesday's low of US$9.48 and then at US$9.40.

 

At the KCBT, bulls' next upside price objective is pushing July wheat above resistance at US$10.50, the analyst said. The bears' next downside objective is pushing and closing prices below psychological support at US$10.00.

 

First resistance is seen at Tuesday's high of US$10.36 and then at US$10.50. First support is seen at Tuesday's low of US$10.11 and then at US$10.00.

 

Hard red winter wheat, traded at the KCBT, may see some moisture during the next five to six as troughs continue to move off the Pacific Ocean into the U.S. central and southern Plains, DTN Meteorlogix said. Most of the precipitation activity appears to be light, the private weather firm said.

 

In India, dry weather and warm temperatures will likely increase stress to filling wheat, Meteorlogix said. The country's northwest crop belt had temperatures of 75 to 85 degrees Fahrenheit Tuesday, the firm said.

 

Temperatures dropped below zero Fahrenheit in extreme eastern Ukraine and northern areas of North Caucasus Russia on Monday morning. There was a few inches of snow on the ground in the area, which was probably enough to protect the wheat from the cold, Meteorlogix said.

 

Russia in January exported 893,000 metric tonnes of wheat, 68% more than in January 2007 and 46% less than in December 2007, the federal customs service reported Wednesday. The largest importers of Russian wheat in January were Egypt with 232,000 tonnes, India 155,800 tonnes and Pakistan 127,900 tonnes. Russia's total wheat exports in the first seven months of the current marketing year - from July 2007 to January - were 11.7 million tonnes, the highest result in recent years.