March 14, 2007

 

US Wheat Outlook on Wednesday: 1-2 cents lower, under spillover pressure

 

 

U.S. wheat futures are expected to start Wednesday's day session on the defensive amid technical weakness and spillover pressure from declines in other markets, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 1 to 2 cents lower per bushel.

 

In e-cbot overnight trading, CBOT May wheat ended unchanged at US$4.66 1/2.

 

Asian stock markets, along with CBOT corn and soybeans, tumbled overnight and will likely drag wheat futures into negative territory, a CBOT floor analyst said. Outside markets, including crude oil, gold and silver, also were weaker and may add selling pressure, he said.

 

There could be further pressure on wheat from carryover losses from Tuesday, analysts said. CBOT May wheat prices Tuesday closed near the session low, and the losses inflicted some new near-term technical damage, a technical analyst noted.

 

The next downside price objective for the bears is closing CBOT May prices below solid support at the February low of US$4.61 1/2, he said. The bulls' next upside price objective is to close prices above solid resistance at US$4.85.

 

First resistance is seen at US$4.70 and then at Tuesday's high of US$4.73. First support lies at Tuesday's low of US$4.65 and then at US$4.61 1/2.

 

Deliveries posted Wednesday against the CBOT March wheat future were 157 contracts. Man Financial was the primary issuer, issuing 92 contracts. The Astro Division of UBS Securities was the primary stopper, stopping 137 contracts. The last trade assigned was March 8.

 

There were no deliveries scheduled at the Kansas City Board of Trade.

 

At the KCBT, bears have the near-term technical advantage, the technical analyst added.

 

The bulls' next upside price objective is closing prices above solid chart resistance at US$5.10. The bears' next downside objective is closing prices below solid support US$4.88.

 

First resistance is seen at US$4.95 and then at Tuesday's high of US$4.98. First support is seen at Tuesday's low of US$4.91 and then at US$4.88.

 

Growing conditions for the U.S. winter wheat crop also continue to look bearish, a CBOT floor trader said.

 

The U.S. Southern Plains appear to be heading toward a wetter period in the major wheat areas, according to DTN Meteorlogix.

 

"Should this verify it would make for very favorable conditions for early developing wheat," the weather firm reported.

 

In the eastern Midwest and Delta, wheat will benefit from warm temperatures, Meteorlogix said. Rainfall is not needed and may be unfavorable in areas that are already too wet from early winter rains, the firm noted.

 

In other news, three South Korean flour mills jointly bought 20,100 metric tonnes of U.S. No. 1 wheat from trading house Cargill at a tender concluded Wednesday, a trader in Seoul said. The shipment is expected to reach South Korea between April 15 and May 15.

 

Morocco's state wheat buyer, meanwhile, said it was tendering to buy 95,000 metric tonnes of European Union soft wheat, plus or minus 10%.