February 25, 2008

 

US Wheat Outlook on Monday: Sharply higher; Minneapolis Grain Exchange leads on supply woes

 

 

U.S. wheat futures are called to start Monday's day session sharply higher amid leadership from the Minneapolis Grain Exchange and news that Kazakhstan plans to limit grain exports, traders said.

 

Chicago Board of Trade May wheat is called to open 30 to 40 cents per bushel higher. In overnight electronic trading, CBOT May wheat soared 42 cents to US$11.06 1/2 per bushel.

 

Kansas City Board of Trade May wheat overnight jumped 38 cents to US$11.53, and MGE May wheat rose 65 3/4 cents to US$16.84. Nearby MGE March wheat overnight surged above US$20 for the first time, hitting a high of US$20.23 before ending up 89 cents at US$20.14.

 

MGE wheat futures will lead the upside amid ongoing concerns about tight supplies on high-protein spring wheat, traded at the exchange, traders said. Word that Kazakhstan will restrict grain exports reignited concerns about short supplies and is pushing prices higher, a trader said.

 

Kazakhstan will curb grain exports by imposing custom duties starting March 1, according to reports. Kazakhstan has already exported nearly 7 million tonnes of grain, of the available 10 million tonnes from the 2007-08 crop, a report said. The majority of the country's grain exports consist of wheat.

 

"The window is closing for high-protein wheat," a CBOT floor trader said.

 

The MGE has removed daily trading limits for the nearby March future and temporarily raised daily trading limits for the remaining contracts to 90 cents. The daily limit for CBOT and KCBT wheat contracts is 60 cents.

 

CBOT and KCBT wheat futures should feel spillover support from the rally at the MGE, a CBOT floor analyst said. There is some talk about the upcoming harvest of the winter wheat crop, but most of the markets' focus remains on shrinking old-crop supplies, he said.

 

CBOT July wheat, which represents the new crop, on Friday closed near the session high, at a fresh contract high close and at a bullish weekly high close, a technical analyst said. CBOT wheat bulls' next upside price objective is to push and close the contract above resistance at US$10.00, he said. The next downside price objective for the bears is pushing prices below solid support at last week's low of US$9.44.

 

First resistance is seen at Friday's high of US$9.87 and then at US$10.00. First support lies at US$9.70 and then at US$9.58.

 

At the KCBT, bulls have regained solid upside technical momentum and their next upside price objective is pushing and closing July wheat above psychological resistance at US$11.00, the analyst said. The bears' next downside objective is pushing and closing prices below psychological support at US$10.00, he said.

 

First resistance is seen at Friday's high of US$10.67 and then at US$10.90 1/2. First support is seen at US$10.50 and then at US$10.30.

 

In China, wheat prices were mostly stable in the week to Monday as trading remained light following the Lunar New Year holiday. Market activity usually returns to normal after the Lantern Festival, which this year was celebrated last Thursday.

 

Widespread light-to-moderate precipitation fell through most of China's wheat region during the weekend, DTN Meteorlogix said. The moisture will help replenish soil moisture for spring growth, although conditions should turn drier and somewhat colder early this week, the private weather firm said.

 

Dry weather and warm-to-hot temperatures are seen in India's wheat regions, Meteorlogix said. The weather is likely increases stress to filling wheat at times during the coming week, the firm said.

 

In the U.S. central and southern Plains, precipitation during the weekend for central Kansas will help to replenish soil moisture for spring growth. Still, more rain is needed in the west and south growing areas, Meteorlogix said.