March 6, 2008

 

US Wheat Outlook on Thursday: Seen mostly up on overnight, money flows

 

 

U.S. wheat futures are expected to start Thursday's day session higher on follow-through buying from the overnight and more money flows into commodities, traders said.

 

Chicago Board of Trade May wheat is called to open 25 to 30 cents per bushel higher. In overnight trading, CBOT May wheat surged 29 3/4 cents to US$11.34 3/4.

 

Kansas City Board of Trade May wheat overnight rose 23 1/4 cents to US$11.98. Minneapolis Grain Exchange May wheat stumbled 19 3/4 cents to US$14.20 in a continued pullback from high prices.

 

Wheat futures felt spillover support overnight from strength in crude oil, traders said. Crude oil futures on the New York Mercantile Exchange surged to new all-time highs near US$106 a barrel in London Thursday.

 

Funds should continue to pour money into commodities, although price action in wheat is expected to remain volatile, traders said. Market participants are reluctant to chase prices too high after a recent rally to record prices, they said. Big price swings also have some traders sitting on the sidelines until market conditions settle down.

 

Weekly U.S. export of 505,300 tonnes for old-crop and new-crop wheat were below trade estimates. Net sales for delivery in 2007-08 were 431,900 tonnes, including a previously announced sale of 400,000 tonnes to Iraq. Cancellations and buybacks of old-crop wheat sales were 195,600 tonnes.

 

Net sales of 73,400 tonnes for delivery in 2008-09 were mainly for Mexico, which bought 33,900 tonnes. Indonesia bought 30,000 tonnes of new crop wheat.

 

In other news, Japan said it bought 117,000 metric tonnes of wheat, including 50,000 tonnes of U.S. semi-hard wheat and 21,000 tonnes of U.S. western white wheat, in a tender concluded Thursday. The shipment is expected to arrive from April to June.

 

Pakistan won't meet its wheat output target of 24 million tonnes for the 2007-08 crop year and may need to import as much as 2 million tonnes, according to a media report. The country will probably produce about 21 million to 22 million tonnes due to planting and growing problems, the report said.

 

Russia exported 893,000 metric tonnes of wheat in January, 70% more than in January 2007, the federal customs service said. The exported wheat was worth US$286.2 million compared with US$98.7 million a year earlier.

 

CBOT wheat bulls' next upside price objective is to push and close the July contract, which represents the new crop, above psychological resistance at US$11.00, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$10.00.

 

First resistance is seen at Wednesday's high of US$10.63 and then at US$11.00. First support lies at Wednesday's low of US$10.30 and then at US$10.15.

 

At the KCBT, bulls' next upside price objective is pushing and closing July wheat above solid resistance at this week's high of US$11.50, the technical analyst said. The bears' next downside objective is pushing and closing prices below solid support at this week's low of US$10.67.

 

First resistance is seen at Wednesday's high of US$11.42 and then at US$11.50. First support is seen at Wednesday's low of US$11.09 and then at US$11.00.

 

Looking at the weather, significant snow or rain will likely hit eastern wheat areas of Texas and Oklahoma Thursday, DTN Meteorlogix said. The Texas wheat belt has another chance for some precipitation by Monday, the private weather firm said.

 

In the eastern Midwest and Delta, there is a chance for snow, ice and rain through eastern and southern wheat areas on Friday and Saturday, Meteorlogix said. The chance for heavier snow or ice is mostly for the eastern Midwest region, the firm said.