March 10, 2008

 

US Wheat Outlook on Monday: Seen weaker on overnight, limit-down soy

 

 

Spillover weakness from the Chicago Board of Trade soy complex and follow-through selling from the overnight are seen pressuring U.S. wheat futures at the start of Monday's day session, traders said.

 

CBOT May wheat is called to open 15 to 20 cents per bushel lower. In overnight electronic trading, CBOT May wheat stumbled 21 1/4 cents to US$10.83 3/4.

 

Kansas City Board of Trade May wheat overnight dropped 13 1/2 cents to US$11.69. Minneapolis Grain Exchange May wheat closed down 59 3/4 cents at US$12.60.

 

Heavy losses in CBOT soybeans and soyoil should continue to weigh on wheat, traders said. Soybeans and soyoil fell limit down overnight on long liquidation that is part of an ongoing correction to high prices, they said.

 

Early weakness in outside markets should add to the bearish tone, a CBOT floor analyst said. Profit-taking also could pressure wheat futures, as prices remain at lofty levels, he said.

 

Recent price action has formed a potentially bearish pennant pattern for CBOT and KCBT July wheat, which represents the new crop, on the daily bar chart, a technical analyst said. CBOT wheat bulls' next upside price objective is to push and close July wheat above solid technical resistance at US$10.87, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$10.30, he said.

 

First resistance is seen at Friday's high of US$10.72 and then at US$10.87. First support lies at US$10.50 and then at Friday's low of US$10.40.

 

At the KCBT, bulls' next upside price objective is pushing and closing July wheat above solid resistance at last week's high of US$11.55, the analyst said. The bears' next downside objective is pushing and closing prices below major psychological support at US$11.00.

 

First resistance is seen at Friday's high of US$11.30 and then at US$11.55. First support is seen at Friday's low of US$11.09 and then at US$11.00.

 

The daily trading limit for MGE hard red spring wheat futures is 90 cents, up from 60 cents Friday after two old-crop contracts ended limit up.

 

The three exchanges raised their default daily limits to 60 cents from 30 cents last month and said they would increase limits by 50% if at least two contracts within the same crop year ended at limit bid or limit offer. The daily trading limit for Chicago Board of Trade and Kansas City Board of Trade wheat futures will remain 60 cents.

 

China's wheat prices were mostly stable in the week to Monday, with regular government wheat auctions supporting the market. Wheat prices in Linyi in Shandong province, a major wheat producing region, were around RMB1,600 a metric tonne, stable from a week ago.

 

However, wheat prices in major consumption regions were slightly higher due to dwindling stocks. Last week, China sold 1.01 million tonnes of wheat it had bought at minimum purchase prices last year, or 23% of the 4.4 million tonnes it planned to sell.

 

The Philippines has formally requested a one-time import allocation of 200,000 metric tonnes of wheat from China to help ease the rising cost of local flour, the director of the Philippine Association of Flour Millers said. The Chinese government has yet to respond to the request, he said.