March 19, 2007

 

US Wheat Outlook on Monday: Up 2-3 cents on e-CBOT, spillover strength

 

 

U.S. wheat futures are expected to start Monday's day session 2 to 3 cents a bushel higher on follow-through buying and support from neighboring markets, traders and analysts said.

 

In e-cbot overnight trading, Chicago Board of Trade May wheat rose 2 1/2 cents to US$4.63 1/4.

 

CBOT May wheat prices Friday closed higher, and there will likely be some more carryover buying Monday, a floor analyst said. CBOT corn also trended higher overnight amid concerns the weather may be too wet for U.S. spring planting, and gains in that market should lend spillover strength to wheat, he added.

 

Still, bears are holding on to some downside technical momentum after recent losses, a technical analyst said.

 

The next downside price objective for the bears is closing prices below solid support at Friday's low of US$4.53 1/2, he said. The bulls' next upside price objective is to close prices above solid resistance at US$4.75.

 

First resistance is seen at Friday's high of US$4.66 1/2 and then at US$4.70. First support lies at Friday's low of US$4.53 1/2 and then at US$4.50.

 

Index traders trimmed their long CBOT wheat futures and options positions by 1,106 lots and increased their short holdings by 155 lots for the week ended March 13, the Commodity Futures Trading Commission reported. They were net long 192,701 contracts, the CFTC said Friday.

 

At the Kansas City Board of Trade, index traders cut their long wheat futures and options positions by 119 contracts and left shorts unchanged, according to the CFTC. They were net long 28,592 contracts.

 

KCBT bears still have some near-term downside technical momentum as a three-week-old downtrend is in place on the daily bar chart, the technical analyst said.

 

The next downside price objective for the bears is closing KCBT May prices below solid support at Friday's low of US$.77 1/4. The next upside price objective for the bulls is closing prices above solid chart resistance at US$5.00.

 

First support is seen at US$4.80 and then at US$4.77 1/4. First resistance is seen at Friday's high of US$4.88 and then at US$4.92.

 

Weather conditions for wheat continue to look bearish, an analyst said.

 

Episodes of showers and thundershowers in the U.S. Southern Plains during the next five to seven days, for example, will provide "very favorable moisture for early developing wheat," according to DTN Meteorlogix.

 

Recent rainfall also has provided favorable soil moisture for China's wheat areas, Meteorlogix said. Warmer temperatures during this week will promote development of the crop, the weather firm reported.

 

Wheat prices in most of China's major producing regions rose in the week to Monday, as the country's wheat output is expected to decline this year. In Shandong, a major wheat-growing province, prices of average-quality wheat rose to RMB1,540-RMB1,620 a metric tonne from the week-ago level of RMB1,560-RMB1,600/tonne.

 

Wheat output in the eastern province may decline by about 17% from last year due to a reduced growing area, an analyst said.

 

In other news, Argentina's 06-07 wheat sales totaled 8.805 million metric tonnes as of March 16, according to the Agriculture Secretariat's latest data. By this time last year, Argentina had sold 5.155 million tonnes of 05-06 wheat.