February 27, 2007

 

US Wheat Outlook on Tuesday: Down 3-5 cents on weak technicals, outside markets

 

 

U.S. wheat futures are predicted to begin trading 3 to 5 cents lower Tuesday, after Monday's bearish technical reversal, weaker prices in overnight trade and lower outside markets, traders said.

 

In overnight electronic trading, CBOT March wheat fell 5 cents to US$4.78 per bushel, while March KCBT hard red wheat declined 5 1/4 cents to US$5.02 1/2.

 

The market should open weaker on Monday's bearish technical reversal, a cash connected trader said. The market is overbought and due for a correction, and outside markets are all trading lower which should also add weakness, he said.

 

Ideas that India might import wheat this year due to tight government stocks are not expected to have any impact, a floor broker said.

 

According to a U.S. Department of Agriculture attach¨¦ report posted on the Foreign Agricultural Services web site, India may need to import wheat in the 2007-08 marketing year despite ideas that production will rebound as Indian government wheat stocks are tight. India's wheat stocks as of Nov. 1 were estimated at 6 million metric tonnes, down from 9 million tonnes a year earlier, according to India's Economic Survey for 2006-07 released Tuesday.

 

The report estimates that Indian wheat imports could reach 3 million metric tonnes.

 

It's the end of the month and some participants may want to trim their positions and lock in their gains, so the market could be on the defensive, a commission house analyst said. In addition, crude, silver and gold are all sharply lower, he added.

 

In the U.S. Midwest soft red winter wheat belt, there is a chance for precipitation, either rain or snow on Wednesday, with the moisture changing to snow on Thursday, DTN Meteorologix Weather said. Precipitation should average .30-1.00 inch with locally heavier amounts possible. Temperatures are expected to average near-to-below normal north and near-to-above normal south in western sections of the region and above-normal in the east, Meteorologix Weather said.

 

In the U.S. hard red winter wheat belt, there is a chance for some light precipitation Wednesday with mostly dry weather forecast for Thursday. Temperatures are forecast below normal north and above normal south on Wednesday and near-to-below normal Thursday, DTN Meteorologix Weather said.

 

On daily open auction technical charts, CBOT May wheat closed near the session low Monday and traded a bearish "outside day" down after trading to a fresh two-month high early in the session, a technical analyst said. Monday's price action is worrisome and market bulls don't want to see follow-through selling on Tuesday, the analyst added. The bulls' next upside price objective is closing prices above US$5.09 per bushel. The bears' next downside price objective is closing prices below solid support at US$4.85 per bushel.

 

First resistance for CBOT May is seen at US$5.00, and then at US$5.04. First support is seen at US$4.95, and then at US$4.90.

 

May KCBT also closed nearer the session low Monday after trading to a two-month high early in the day. The bulls' next upside price objective is closing prices above solid chart resistance at US$5.24 per bushel while the bears' next downside objective is closing prices below solid support at US$5.05.

 

First resistance for KCBT May is seen at US$5.20 and then at US$5.24. First support is seen at US$5.14 and then at US$5.10.

 

In other wheat news, Malaysian wheat imports are projected to rise over 6% in the 2006-07 marketing year as the demand for wheat based products grows, according to a USDA Foreign Agricultural Services report.

 

Japan's Agriculture Ministry is seeking 150,000 metric tonnes of wheat in a tender to be concluded Thursday, agriculture ministry officials said Tuesday. Of the total, 85,000 is expected to be of U.S. origin.

 

South Korean flour mills bought 20,600 metric tonnes of U.S. wheat in a tender concluded Tuesday, a trader in Seoul said.