February 26, 2008

 

US Wheat Outlook on Tuesday: Higher on follow-through, short supplies

 

 

Old-crop U.S. wheat futures are expected to start Tuesday's day session stronger on follow-through buying and ongoing concerns about tightening supplies, 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 37 3/4 cents to US$11.62 1/4.

 

Kansas City Board of Trade May wheat is called to start 40 to 45 cents higher after climbing 44 3/4 cents overnight to US$12.19 3/4, traders said. Minneapolis Grain Exchange May wheat ended limit up, US$1.35 higher, at US$18.43 1/4, and is expected to start at least US$1 higher, they said.

 

The daily trading limit for CBOT and KCBT wheat futures is 90 cents, while the MGE limit for wheat is US$1.35 in all contracts except the nearby March. MGE March wheat is trading without limits. It fell US$1.20 overnight in a setback from a historic rally Monday.

 

Concerns about tight stocks continue to support old-crop wheat, traders said. The market, in particular, is focusing on short supplies of high-quality hard red spring wheat, traded at the MGE, they said.

 

There wasn't much major news out overnight, although there is scattered talk that India and Iraq may jump back in the wheat market as buyers, traders said. Liffe's Paris milling wheat futures were narrowly mixed Tuesday, with traders waiting for the U.S. markets to open.

 

Ukraine is going to export 400,000 metric tonnes of wheat to Georgia, with shipments starting in April, the Georgian agriculture ministry said. Ukraine also is going to supply Kazakhstan with 30,000 tonnes of wheat, an official said. Kazakhstan plans to restrict wheat exports with custom duties starting March 1, according to reports.

 

Pakistan's government, meanwhile, will raise its wheat procurement price for the 2007-08 crop and buy a minimum of 5 million metric tonnes of the crop, expected at 23 million tonnes, an official said. The government previously said it would buy 7 million tonnes of wheat from local growers from the current crop.

 

Looking at new-crop U.S. prices, the next upside price objective for CBOT bulls is to push and close July wheat above major psychological resistance at US$11.00, a technical analyst said. The next downside price objective for the bears is pushing prices below solid support at US$9.87, which would fill on the downside Monday's upside price gap on the daily bar chart, he said.

 

First resistance is seen at Monday's contract high of US$10.46 1/2 and then at US$10.76 1/2. First support lies at Monday's low of US$10.15 and then at US$10.00.

 

At the KCBT, bulls' next upside price objective is pushing and closing prices above resistance at the contract high of US$11.35, the analyst said. The bears' next downside objective is pushing and closing prices below solid support at US$10.67, which would fill on the downside Monday's big upside price gap on the daily bar chart.

 

First resistance is seen at the contract high of US$11.35 and then at US$11.50. First support is seen at US$11.00 and then at Monday's low of US$10.90.