March 11, 2008

 

US Wheat Outlook on Tuesday: Seen up on bullish USDA data, overnight trade

 

 

U.S. wheat futures are poised to start Tuesday's day session firmer on a bullish cut in U.S. ending stocks and follow-through buying from the overnight, traders said.

 

Chicago Board of Trade May wheat is called to open 10 to 20 cents per bushel higher. In overnight electronic trading, CBOT May wheat rose 14 cents to US$11.77.

 

The U.S. Department of Agriculture lowered its forecast for 2007-08 U.S. wheat ending stocks to 242 million bushels from 272 million in February. The average of analysts' estimates in a pre-report survey was 263 million, with a range of guesses of 242 to 272 million.

 

"Despite record prices, export commitments for U.S. wheat continue to accumulate raising prospects for higher exports of hard red winter, hard red spring, and durum wheat than projected last month," the USDA said. "Ending stocks are projected at 242 million bushels with stocks-to-use dropping to 10%, the lowest since 1946/47."

 

The government pegged HRW wheat stocks at 106 million bushels, down from 121 million last month, and HRS wheat stocks at 63 million bushels, down from 73 million. Durum stocks were lowered to 14 million from 19 million, while soft red winter wheat and white wheat stocks remained unchanged.

 

The adjustments should be particularly supportive to contracts at the Kansas City Board of Trade, which trades HRW wheat, and at the Minneapolis Grain Exchange, which trades spring wheat, said Bill Nelson, analyst for Wachovia Securities.

 

The estimate for world wheat ending stocks increased to 110.4 million metric tonnes, up from 109.7 million in February. That is "a bit bearish," although traders will likely focus on tight domestic stocks, Nelson said.

 

A good portion of the global increase in ending stocks came from India. The USDA put India's wheat ending stocks at 6.41 million tonnes, up from 5.49 million in February.

 

CBOT bulls have regained solid upside technical momentum after wheat futures Monday closed near session highs, a technical analyst said. Monday's price action negated a potentially bearish pennant pattern on the daily bar chart, he added.

 

The CBOT bulls' next upside price objective is to push and close July wheat, which represents the new crop, above resistance at US$11.50, the analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$10.50.

 

First resistance is seen at Monday's high of US$11.28 1/2 and then at US$11.36 1/2. First support lies at US$11.00 and then at US$10.87.

 

KCBT July wheat on Monday scored a bullish "outside day" up on the daily bar chart, the analyst said. The bulls' next upside price objective is pushing and closing the contract above major psychological resistance at US$12.00, he said. The bears' next downside objective is pushing and closing prices major psychological support at US$11.00.

 

First resistance is seen at Monday's high of US$11.66 and then at US$11.90. First support is seen at US$11.55 and then at US$11.30.

 

In other news, Kazakhstan's agriculture minister said the government has no intention of imposing limits on grain exports in the near future. The news is bearish, a trader said, as the government last month said it would limit its grain exports with export taxes.

 

Japan said is seeking 142,000 metric tonnes of wheat, including 46,000 tonnes of U.S. HRW wheat and 21,000 tonnes of U.S. semi-hard wheat, in a routine tender to be concluded Thursday. The shipment would arrive between April and June.

 

Looking at the weather, there is some chance for light precipitation in HRW wheat areas of the U.S. central and southern Plains, DTN Meteorlogix said. Rains may favor northern and eastern areas of the Plains during the next five days, the private weather firm said.

 

The outlook for the Plains during the next six to 10 days is more uncertain, Meteorlogix said. There could be additional precipitation within that period as well, the firm said.

 

In SRW wheat areas of the eastern Midwest and Delta, the next chance for moderate precipitation appears to be Friday, Meteorlogix said. The eastern Midwest and the Delta may see the most moisture, and it will likely come more as rain than snow, the firm said.