March 26, 2007

 

US Wheat Outlook on Monday: Lower to start after slipping overnight

 

 

U.S. wheat futures are expected to start Monday's day session lower on follow-through selling from the overnight trading session and amid technical weakness, analysts and traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 1 to 3 cents lower per bushel.

 

In e-cbot trading, CBOT May wheat was down 1 1/2 cents at US$4.60.

 

Activity is expected to be choppy during the day session as traders begin to position themselves ahead of the release of the U.S. Department of Agriculture's planting intentions and grain stocks report, which is due Friday. There are expectations that U.S. farmers will shift millions of acres of farmland to corn to take advantage of high prices and demand for ethanol.

 

CBOT May wheat prices on Friday closed lower and near the session low. Bears still have the slight near-term technical advantage as a four-week-old downtrend line is in place on the daily bar chart, a technical analyst said.

 

The next downside price objective for the bears is closing prices below solid support at this month'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 last week's high of US$4.69 1/2 and then at US$4.75. First support lies at US$4.60 1/2 and then at US$4.58 1/2.

 

Index traders trimmed long CBOT wheat futures and options positions in the weekend ended March 20 by 1,045 lots and short positions by 907 lots, according to the Commodity Futures Trading Commission. The traders were net long 192,563 contracts, the CFTC said.

 

At the Kansas City Board of Trade, May wheat prices also closed lower and near the session low Friday amidst a similar four-week-old downtrend line on the daily bar chart, the analyst said.

 

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

 

First resistance is seen at Friday's and last week's high of US$4.89 and then at US$4.95. First support is seen at US$4.81 and then at last week's low of US$4.76.

 

At KCBT, index traders trimmed long positions by 1,613 lots and increased shorts by 1 lot. They were net long 26,978 contracts, the CFTC said.

 

Looking at the weather, additional rain and warm temperatures in the U.S. Southern Plains region during the next few days allow for "nearly ideal" wheat growing conditions at this time, the DTN Meteorlogix weather firm reported. Ideas that the U.S. hard red wheat crop has the potential for high yield remain bearish, a CBOT floor trader said.

 

In the eastern Midwest and Delta, the firm's forecast calls for frequent episodes of rain, showers or thunderstorms during the next seven days. Persistent precipitation has caused some concern that the fields will become unfavorably wet for developing wheat, although the U.S. crop is thought to be in "generally good shape," the analyst said.

 

In China, recent rainfall has provided favorable soil moisture for wheat areas, and warm temperatures will promote development of the crop, Meteorlogix said.

 

Wheat prices in most of China's major producing regions rose in the week to Monday on insufficient stocks and rising demand from processing plants. In Shandong, a major wheat-growing province, prices of average-quality wheat rose to RMB1,560-RMB1,640 a metric tonne from the week-ago level of RMB1,540-RMB1,620/tonne.

 

In other news, Argentina's 2006-07 wheat sales totaled 8.805 million metric tonnes as of March 23, unchanged from a week ago, according to the Agriculture Secretariat's latest data. By this time last year, Argentina had sold 5.58 million tonnes of 2005-06 wheat.

 

Two weeks ago, the government closed the registry for new wheat exports in the face of soaring export declarations.