March 3, 2008

 

US Wheat Outlook on Monday: Firmer start on follow-through, bounce

 

 

U.S. wheat futures are expected to start Monday's day session solidly higher on follow-through buying from the overnight and in a rebound from heavy losses last week, 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 rose 39 3/4 cents to US$11.25 3/4.

 

Kansas City Board of Trade May wheat overnight jumped 42 cents to US$12.02. Minneapolis Grain Exchange May wheat was up 29 3/4 cents at US$16.49 1/2.

 

The markets are bouncing a bit after setting back from record high prices last week, a CBOT floor trader said. The CBOT soy complex also is surging and offering spillover support, he added.

 

The daily trading limit for CBOT, KCBT and MGE wheat futures is 60 cents Monday. The exchanges reverted to the default limit of 60 cents from higher levels after no wheat futures contract month closes limit bid or limit offer for three consecutive business days.

 

During the weekend, Egypt's state-owned General Authority for Supply Commodities said it bought 125,000 metric tonnes of wheat in a tender. Most of the wheat was Russian, although 25,000 tonnes could potentially be U.S. soft red winter wheat, an official said. The wheat was already in store in Egypt.

 

SRW wheat in the U.S. eastern Midwest and Delta should get hit by rain, thunderstorms, snow and ice Monday and Tuesday, DTN Meteorlogix said. Heavy precipitation totals appear likely, the private weather firm said.

 

Hard red winter wheat in the central and southern Plains also should see "significant precipitation" Monday, Meteorlogix said. The moisture will help wheat areas of south-central and east Kansas, Oklahoma and central to east Texas, the firm said.

 

CBOT bulls' next upside price objective is to push and close July wheat, which represents the new crop, above solid resistance at Friday's high of US$10.50, a technical analyst said. The next downside price objective for the bears is pushing prices below support at US$9.87, which would fill on the downside an upside price gap on the daily bar chart.

 

First resistance is seen at US$10.15 and then at US$10.25. First support lies at Friday's low of US$9.92 and then at US$9.87.

 

At the KCBT, bulls' next upside price objective is pushing and closing prices above resistance at US$11.35, 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 US$11.00 and then at Friday's high of US$11.15. First support is seen at Friday's low of US$10.75 and then at US$10.67.

 

In other news, new forecasts for Australian production predict a strong rebound. Australian wheat production will rise to 25.95 million metric tonnes from a drought-affected crop of 13.09 million tonnes this crop year, according to the government's chief commodities forecaster, the Australian Bureau of Agricultural and Resource Economics, or Abare.

 

Rabobank Australia Ltd. predicted wheat production in Australia could double to 26 million metric tonnes next crop year. Summer rainfall helped replenish soil moisture levels in much of the eastern states, but further rains will be needed before planting in May and June, particularly in Victoria, South Australia and West Australia states, an analyst said.