March 1, 2007

 

US Wheat Outlook on Thursday: Down 3-5 cents on weak equity markets, e-CBOT

 

 

U.S. wheat futures are forecast to start Thursday's day session trading 3 to 5 cents lower as weaker equity markets and lower prices in overnight trading are expected to press prices down, a CBOT floor analyst said.

 

In overnight electronic trading, CBOT May wheat fell 3 3/4 cents to US$4.84 1/4 per bushel, while May KCBT hard red wheat declined 3 1/2 cents to US$5.12.

 

Wheat should come under pressure as equity markets were weaker overnight in Asia and grains were lower in overnight activity, a commercial trader said.

 

The trade will focus on the weakness in the equity markets and price direction will be determined by what the speculative interests want to do, a floor trader said.

 

"People would rather lose their opinion than their money," he said.

 

The U.S. Department of Agriculture reported weekly wheat export sales totaled 321,700 metric tonnes for the week ended Feb. 22. A floor analyst termed the sales "neutral," with sales within the range expected by analysts.

 

The USDA's chief economist forecast 2007 U.S. wheat production will be 2.2 billion bushels, up 360 million from last year. A floor analyst noted the market is expecting U.S. production to rebound this year and said the report should not have much impact.

 

Deliveries posted against the March future were 3,299 contracts. Large issuers included the customer account of Goldman Sachs, which issued 1,033 contracts and the customer account of Bear Stearns, which issued 600 contracts. Large stoppers included the customer account of Dowd Wescott, which stopped 604 contracts and the customer account of Man Financial, which stopped 577 contracts. The last trade date assigned was Feb. 28.

 

In the U.S. Midwest soft red winter wheat belt, moderate to heavy snow and freezing rain are forecast in northern and western areas of the region Thursday before snow and wind continue into Friday in some locations, DTN Meteorologix Weather said. Precipitation is expected to average 0.3-1.5 inches. In the eastern half of the region, snow should change to rain Thursday and then back to snow on Friday with precipitation of 0.3-1.5 inches expected, Meteorologix Weather said. Temperatures in the western half of the Midwest are expected to be near normal Thursday and below normal Friday, while in the eastern half of the region temperatures are forecast above normal Thursday and near-to-below normal west and below normal east on Friday.

 

In the U.S. hard red winter wheat belt, there is a chance for some light precipitation Thursday in parts of the region with dry weather expected Friday, Meteorologix Weather said. Temperatures are forecast to average near-to-below normal north and above normal south Thursday and near-to-below normal Friday.

 

On daily open auction technical charts, CBOT May wheat settled near the session high on short covering but near-term technical damage has occurred this week, a technical analyst said. The bulls' next upside price objective is to close prices above solid resistance at US$4.95 1/2 a bushel, which would fill on the upside Tuesday's downside price gap, the analyst said.

 

First resistance for CBOT May is seen at US$4.90, and then at US$4.92 1/2. First support is seen at US$4.85, and then at US$4.80.

 

May KCBT filled on the upside Tuesday's downside gap on the daily bar chart, which did repair chart damage, the analyst said. The bulls' next upside price objective is closing prices above this week's high of US$5.24 while the bears' next downside objective is closing prices below solid support at US$5.

 

First resistance for KCBT May is seen at Wednesday's high of US$5.17 and then at US$5.20. First support is seen at US$5.10 and then at US$5.05.

 

In other wheat news, China sold 556,000 metric tonnes of wheat out of the 1 million tonnes it planned to sell at its weekly auction on Thursday. The sale is part of a series of auctions designed to stabilize prices from wheat purchased last year by state warehouses.

 

Japan's Agriculture Ministry bought 150,000 metric tonnes of wheat in a tender concluded Thursday, with 85,000 metric tonnes of U.S. origin.

 

Morocco is tendering for 200,000 metric tonnes of U.S. soft wheat, the country's state wheat buyer said.