March 12, 2008

 

US Wheat Outlook on Wednesday: Mixed start seen as markets pull back

 

 

U.S. wheat futures are expected to start Wednesday's day session mixed, with new-crop contracts seen stepping back from a limit-up rally Tuesday, traders said.

 

In overnight electronic trading, Chicago Board of Trade May wheat closed up 2 cents at US$12.25 per bushel. CBOT July wheat, which represents the new crop, fell 2 1/4 cents to US$11.79 1/2.

 

Kansas City Board of Trade May wheat overnight rose 3 cents to US$12.64. Minneapolis Grain Exchange May wheat jumped 13 1/2 cents to US$14.50.

 

Supply concerns continued to be supportive for nearby wheat futures, but new-crop contracts are retreating after the markets surged limit up Tuesday, a CBOT trader said. The old-crop futures also could easily succumb to pressure after the sharp rally, he said.

 

Although nearby wheat futures closed limit up Tuesday, the markets weakened a bit at the close. That indicates there is room for a minor sell-off, a KCBT trader said.

 

It also is bearish that private exporters reported cancellations of export sales of 100,000 metric tonnes of hard red winter wheat for delivery to Algeria during the 2007-2008 marketing year, traders said. The 2007-2008 marketing year for wheat began June 1.

 

CBOT and KCBT July wheat on Tuesday closed at a fresh contract high close after the U.S. Department of Agriculture said 2007-08 ending stocks had dropped from the previous month. Wheat bulls have regained solid upside technical momentum, a technical analyst said.

 

CBOT bulls' next upside price objective is to push and close July wheat above resistance at the contract high US$12.50. The next downside price objective for the bears is pushing and closing prices below psychological support at US$11.00, he said.

 

First resistance is seen at US$12.00 and then at US$12.25. First support lies at US$11.50 and then at Tuesday's low of US$11.25.

 

At the KCBT, bulls' upside price objective is pushing and closing July wheat above major resistance at the contract high of US$13.00, the analyst said. The bears' next downside objective is pushing and closing prices below solid support at US$11.50.

 

First resistance is seen at Tuesday's high of US$12.25 and then at US$12.50. First support is seen at US$12.00 and then at Tuesday's low of US$11.65.

 

There was little fresh news out overnight for the markets to digest, traders said. Argentina announced a new sliding scale for export taxes on grains, but a trade said he didn't expect it to have much of an impact on wheat.

 

Under the new scheme, the export tax on wheat and corn will decrease by about one percentage point based on current prices, Argentina's economy minister said. The export tax on soybeans will rise 7-9 percentage points based on current prices.

 

Argentina told exporters late Monday it had closed the grain export registry for two working days. However, the move was not seen as significant to wheat because Argentina had previously said it wouldn't allow wheat shipments before April 8.

 

The weather in the U.S. central and southern Plains looks somewhat beneficial for hard red winter wheat, traders said. Storm systems are headed for the region Friday and Monday, DTN Meteorlogix said in a forecast.

 

Moderate to locally heavy precipitation also favors central and southern areas of the eastern Midwest and Delta during Thursday night through early Saturday, Meteorlogix said. Moderate to heavy precipitation is possible through the region early next week.