March 22, 2007

 

US Wheat Outlook on Thursday: Weaker start on e-CBOT declines

 

 

U.S. wheat futures are expected to start Thursday's day session on the defensive after overnight declines, although trading could quickly become choppy and two-sided, traders and analysts said.

 

Benchmark Chicago Board of Trade May wheat is called to open 2 to 4 cents lower per bushel.

 

In e-cbot trading, May wheat stumbled 3 cents to US$4.62 1/2.

 

The losses overnight are expected to give traders their cue for the opening, but renewed short covering or bargain buying could give prices a boost, a CBOT floor analyst said. Light fund buying also has given wheat some strength recently and could show up again as a supportive factor, he added.

 

Wheat futures, however, are still largely looking to the CBOT corn market for direction, a floor broker noted. Market participants are waiting for the U.S. Department of Agriculture to release its planting intentions and grain stocks report on March 30, he said.

 

Weekly U.S. wheat export sales figures were in line with trade estimates and should not be much of a factor for the market, a CBOT floor trader added.

 

The USDA said wheat export sales for the week ended March 15 were 474,900 metric tonnes, while analysts had predicted sales would be 300,000 to 600,000 tonnes.

 

The weekly sales were 7% above the previous week and 16% above the prior 4-week average, according to the USDA. Big buyers included South Korea, which took 90,200 tonnes; Nigeria, which bought 85,200 tonnes; and Japan, which bought 72,800 tonnes.

 

Looking at the technical picture for wheat, bears still have the near-term advantage, a technical analyst said.

 

The next downside price objective for the bears is closing CBOT May prices below solid support at this week's low of US$4.52. The bulls' next upside price objective is to close prices above solid resistance at US$4.75.

 

First resistance is seen at Wednesday's high of US$4.69 1/2 and then at US$4.75. First support lies at Wednesday's low of US$4.60 1/2 and then at US$4.58 1/2.

 

At the Kansas City Board of Trade, the bears' next downside objective is closing May prices below solid support at the January low of US$4.75 1/2 a bushel, the analyst said. The bulls' next upside price objective is closing prices above solid chart resistance at US$5.00 a bushel.

 

First resistance is seen at Wednesday's high of US$4.89 and then at US$4.95. First support is seen at Wednesday's low of US$4.81 1/4 and then at this week's low of US$4.76.

 

Weather in hard red winter wheat regions continues to be beneficial for the developing crop and bearish for prices, analysts said.

 

Episodes of showers and thundershowers are likely in the U.S. Southern Plains during the next three to four days, according to the DTN Meteorlogix weather firm. Moderate to heavy rainfall is also possible in the eastern Midwest during the next few days, the firm said.

 

Overseas, Argentina's Agriculture Secretariat in its monthly crop report held its forecast for 2006-07 wheat production at 14 million tonnes.

 

The secretariat raised the estimate for planted area of 2006-07 wheat to 5.4 million hectares, up from a 5.3 million forecast a month earlier. If the forecast holds, it would put area up 3.6% from the previous season's planted area of 5.21 million hectares.

 

Brazil's agricultural policy secretary, meanwhile, said Wednesday that local wheat farmers can count on government price supports for the 2007-08 crop, according to an Agriculture Ministry press statement. The government provided price supports and other relief for 1.35 million metric tonnes of wheat in the 2004-05 crop of 5.8 million tonnes, and 1.4 million tonnes received support in the small 2.2 million tonne 2006-07 crop.

 

Wheat farmers, most located in the south, lost a third or more of their crops last season due to frost.