March 5, 2007

 

US Wheat Outlook on Monday: Called 7-9 cents lower on equities, e-CBOT losses

 

 

U.S. wheat futures are forecast to start Monday's day session trade 7-to-9 cents lower, as weaker equity markets overnight, losses in E-CBOT activity and follow through pressure from Friday are expected to weigh on prices at the start, floor traders said.

 

In overnight electronic trading, CBOT May wheat declined 9 1/4 cents to US$4.64 1/2 per bushel, while May KCBT hard red wheat dropped 7 cents to US$4.97.

 

Wheat will follow the equity markets, a floor analyst said. Overseas equity markets sold off last night, which spilled over into commodities, and the market is looking to open lower Monday, he added.

 

The reduction in liquidity across asset classes is expected to weigh on the market, a floor trader said. The outside markets are rattled and the lack of fresh fundamental news should keep wheat on the defensive, while technically the market looks weak, the trader said.

 

In the U.S. Midwest soft red winter wheat belt, mostly dry weather is forecast in the region with a few snow showers possible in northern sections of the region through Wednesday, DTN Meteorologix Weather said. Temperatures are expected to average below normal.

 

In the U.S. hard red winter wheat belt, mainly dry conditions are expected Monday through Wednesday with temperatures above normal Monday and Tuesday and near-to-above normal Wednesday, Meteorologix Weather said.

 

On daily open auction technical charts, CBOT May wheat settled at the weekly low close, a technical analyst said. The bulls' next upside price objective remains closing prices above US$4.95 1/2 per bushel which would fill to the upside Tuesday's downside price gap. The next downside objective for the bears is closing prices below last week's low of US$4.68.

 

First resistance is seen at US$4.85 and then at US$4.90. First support is seen at US$4.73 and then at US$4.70.

 

May KCBT settled near mid-range Thursday but also at the weekly low close, the analyst added. First resistance is seen at Friday's high of US$5.08 and then at US$5.12. First support lies at US$5.00 and then at US$4.95.

 

Large speculative traders increased their long Chicago Board of Trade wheat futures and options on futures positions by 10,096 contracts while reducing their short positions by 1,841 contracts and are now overall net long 1,347 contracts as of Feb. 27, the CFTC reported Friday. Large commercial traders reduced their long futures and options positions by 10,995 contracts and increased their short holdings by 2,746 contracts and are now net short 170,767 futures and options on futures contracts.

 

At the Kansas City Board of Trade, large speculative traders added 3,801 contracts to their long wheat futures and options on futures positions and trimmed their short positions by 1,088 contracts and are now net long 28,836 contracts. Large commercial traders increased their short positions by 2,563 contracts and reduced their long positions by 1,748 contracts and are now net short 47,562 contracts.

 

Deliveries posted against the CBOT March future were 2,433 contracts. Large issuers included the customer account of Dowd Wescott, which issued 423 contracts and the customer account of the LBS division of Man Financial which issued 443 contracts. Large stoppers included the customer account of the Astro division of UBS Securities, which stopped 445 contracts, the customer account of the USA Blue division of Man Financial, which stopped 409 contracts, and the customer account of Fortis, which stopped 396 contracts. The last trade assigned was Mar. 2.

 

In other wheat news, wheat prices in China were little changed from the previous week amid quiet demand after the Lunar New Year holiday, a Chinese analyst said.

 

Monday morning, the U.S. Department is scheduled to release the weekly export inspections report at 11:00 a.m. EST (1700 GMT).