March 17, 2008

 

US Wheat Outlook on Monday: Firmer start on overnight follow-through

 

 

U.S. wheat futures are expected to start Monday's day session firmer on follow-through buying after an overnight bounce, traders said.

 

Chicago Board of Trade May wheat is called to open 8 to 15 cents per bushel higher. In overnight electronic trading, CBOT May wheat jumped 13 1/4 cents to US$12.04 3/4.

 

Wheat futures rose overnight following a profit-taking pullback Friday. Trading should remain volatile amid jitters about the health of the U.S. economy, traders said.

 

Wheat could come under pressure from weakness in equities markets and in CBOT corn and soybeans, traders said. Investor confidence in the global financial system took another beating after JPMorgan Chase & Co. (JPM) during the weekend agreed to buy Bear Stearns Cos. (BSC) at a massive discount and the Federal Reserve stepped in with an emergency discount rate cut.

 

Still, fundamentals for wheat remain supportive amid ongoing worries about historically tight ending stocks, an analyst said. There also continue to be concerns about dryness in the western wheat areas of the U.S. Plains, a CBOT floor trader said.

 

A more active weather pattern is expected to improve soil moisture conditions in the central and southern Plains during the next 10 days, DTN Meteorlogix said. However, some dryness may continue with this pattern over parts of West Texas, the Oklahoma Panhandle and far southwest Kansas, the private weather firm said.

 

Wet weather is forecast for southern and eastern portions of the Midwest and the Delta, Meteorlogix said. Periods of cold temperatures also may hit the area, the firm said.

 

No serious chart damage occurred from Friday's pullback, a technical analyst said. CBOT wheat bulls have overall near-term technical advantage, he said.

 

CBOT bulls' next upside price objective is to push and close July wheat, which represents the new crop, above psychological resistance at US$12.00, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at Friday's low of US$11.23 3/4.

 

First resistance is seen at US$11.81 3/4 and then at US$12.00. First support lies at US$11.44 and then at US$11.23 3/4.

 

At the KCBT, bulls' next upside price objective is pushing and closing July wheat above solid technical resistance at the contract high of US$13.00, the technical analyst said. The bears' next downside objective is pushing and closing prices major psychological support at US$12.00.

 

First resistance is seen at Friday's high of US$12.62 and then at US$13.00. First support is seen at US$12.00 and then at Friday's low of US$11.76.

 

In China, wheat prices were mostly unchanged in the week to Monday amid stable supply and demand, traders said. Wheat prices in Linyi in Shandong province, a major wheat-producing region, were around RMB1,600 a metric tonne, stable from a week ago.