March 7, 2007

 

US Wheat Outlook on Wednesday: Flat to 2 cents higher on short covering

 

 

U.S. wheat futures are forecast to start Wednesday's day session trade flat-to-2 cents higher as short covering after Tuesday's weakness and light support from a firmer tone in overnight activity are expected to underpin the market at the start of trading, a commission house analyst said.

 

In overnight electronic trading, CBOT May wheat rose 2 1/2 cents to US$4.75 1/2 per bushel, while May KCBT hard red wheat slipped 1 1/4 cents to US$5.00.

 

There is not much fresh news to trade on but prices were higher overnight and the market could see some evening up of positions ahead of Friday's U.S. Department of Agriculture supply and demand reports, the commission house analyst said.

 

U.S. wheat ending stocks for the 2006-07 marketing year are estimated at 473 million bushels, according to a survey of 12 analysts conducted by Dow Jones Newswires. The USDA estimated ending stocks at 472 million bushels in February.

 

Wheat could see some light support but the weather remains favorable for crop development in the U.S. and participants will also be watching other markets for direction, a floor trader said.

 

In the U.S. Midwest soft red winter wheat belt, mainly dry weather is forecast for Thursday and Friday with a few light showers possible on Friday, DTN Meteorologix Weather said. Temperatures are expected to average below normal Thursday and near-to-above normal Friday.

 

In the U.S. hard red winter wheat belt, mainly dry conditions are expected Thursday with a chance for light showers Thursday night into Friday in south and southwest sections of the region, Meteorologix Weather said. Temperatures are expected to average above normal both Thursday and Friday.

 

On daily open auction technical charts, CBOT May wheat ended near the session low and market bulls have faded, a technical analyst said. The bulls' next upside price objective is to close prices above US$4.85 per bushel, with the bears' downside objective closing prices below this week's low of US$4.68 1/4.

 

First resistance is seen at US$4.80 and then at US$4.82 1/2. First support is seen at US$4.70 and then at US$4.67 1/4.

 

May KCBT settled near the session low and the bulls and the bears are on a level technical playing field, the analyst said. The bulls' next upside price objective is closing prices above chart resistance at US$5.24 while the bears' downside objective is closing prices below US$5.00, the analyst said.

 

First resistance is seen at US$5.09 and then at US$5.15. First support lies at US$5.00 and then at US$4.95.

 

Deliveries posted against the March future were 1,104 contracts. Large issuers included the customer account of the USA Blue division of Man Financial, which issued 268 contracts and the customer account of Fortis, which issued 243 contracts.

 

Large stoppers included the customer account of the Astro division of UBS Securities, which stopped 425 contracts and the customer account of Bank of America, which stopped 173 contracts. The last trade assigned was Mar. 6.

 

Preliminary open interest in March is 1,631 contracts

 

In other wheat news, India's wheat crop is expected to be above the official estimate in the current crop year, the country's food secretary said Wednesday. India has estimated that wheat production will be at least 72.5 million metric tonnes, above the 69.48 million produced last year.

 

Despite the expected increase in production, India is expected to import wheat this year in an effort to rebuild its stocks, an industry executive said Wednesday.

 

In 2006 India imported wheat after a poor domestic harvest.

 

Asian wheat prices may continue to weaken on ideas of rising global wheat stocks in the 2007-08 crop year, with Australia's wheat output expected to rise and the potential for higher than expected Indian wheat production, analysts said.