March 16, 2007

 

US Wheat Outlook on Friday: Steady to lower after flat e-CBOT action

 

 

U.S. wheat futures are expected to start Friday's day session steady to lower after ending the overnight session unchanged and with some spillover weakness seen from neighboring markets, analysts said.

 

In e-cbot overnight trading, Chicago Board of Trade May wheat closed flat at US$4.55 1/2 per bushel.

 

CBOT corn and soybean futures slipped lower overnight and could exert their downside influence on wheat, a floor trader said. Bears also have the downside technical advantage in wheat at CBOT and the Kansas City Board of Trade, a technical analyst added.

 

"Bears are gaining downside technical power," he said. "There has been a lack of bullish fundamental news in the wheat market. This market had been supported by the bull market runs in corn and soybeans, but now that those rallies have petered out, wheat futures are seeing significant price weakness."

 

The next downside price objective for the bears is closing CBOT May prices below solid support at US$4.50. The bulls' next upside price objective is to close prices above solid resistance at US$4.75.

 

First resistance is seen at US$4.60 and then at Thursday's high of US$4.65 1/2. First support lies at Thursday's low of US$4.55 and then at US$4.50.

 

At KCBT, the bulls' next upside price objective is closing prices above solid chart resistance at US$5.00. The bears' next downside objective is closing prices below solid support at the January low of US$4.75 1/2.

 

First resistance is seen at US$4.83 and then at US$4.85. First support is seen at Thursday's low of US$4.78 1/4 and then at US$4.75 1/2.

 

On Friday, private analytical firm Informa Economics is expected to release its estimates for U.S. spring planting acreage. Traders said they were waiting to see the numbers amid expectations that farmers will shift millions of acres to corn from soybeans to take advantage of high corn prices and sharp demand for ethanol.

 

The news front has been slow lately so the markets are "aching" for some fresh inputs, a CBOT floor trader said. Trading will like be choppy, he said.

 

Weather forecasts remain mostly favorable for wheat development and bearish for prices, an analyst said.

 

The U.S. Southern Plains appear to be heading toward a wetter period in the major wheat areas, DTN Meteorlogix reported. The period Monday through Friday of next week is expected to be active.

 

"Additional rainfall at this point in the season would maintain favorable yield prospects for wheat," the weather firm said.

 

In the eastern Midwest and Delta, wheat fields will dry out slowly, since temperatures are below normal, Meteorlogix said. Rainfall next week may return wet conditions to most of the wheat belt, the firm noted.

 

In other news, India's federal government asked State Trading Corp. to take preparatory steps for importing up to 3 million metric tonnes of wheat if required. STC is a state-run company that imported 5.5 million tonnes of wheat on behalf of the government in 2006.

 

The government also reduced the import duty on wheat to zero until Dec. 31 and raised the minimum support price for wheat by INR1,000/tonne to INR8,500/tonne for making local purchases from farmers.

 

Argentine wheat prices, meanwhile, held steady on the week, with a government closure of the wheat export registry and confusion surrounding the wheat subsidy program making traders hesitant to step into the market, analysts said.