March 27, 2007

 

US Wheat Outlook on Tuesday: Flat-1 cent down, following e-CBOT momentum

 

 

U.S. wheat futures are expected to start Tuesday's day session flat to 1 cent lower as overnight declines and a slow news front weigh on prices, traders said.

 

In e-cbot trading, Chicago Board of Trade May wheat was down 1 cent at US$4.57.

 

Market participants remain focused on the upcoming release of the U.S. Department of Agriculture's planting intentions and grain stocks reports, a CBOT floor trader said. Activity will likely be choppy and thin as traders position themselves before the estimates come out Friday morning, he added.

 

The trade has been eagerly anticipating the release of the reports as they will provide new indications about the size of the U.S. corn crop this spring. Farmers are expected to plant more corn, at the expense of other crops, to take advantage of high prices and demand for ethanol. The reports are due to be released Friday at 8:30 a.m. EDT.

 

Wheat will likely shadow corn's price action until the trade is comfortable that corn supplies are large enough to meet expected demand, an analyst noted. Commodity funds sold CBOT corn and soybeans on Monday, and a repeat of fund selling in those markets should drag wheat down too, she said.

 

Fundamentally, the trade is well aware the U.S. crop has the potential to produce a strong yield after favorable conditions recently, he added.

 

The condition of Kansas' wheat crop improved in week ended March 25, according to the USDA's weekly crop update. The amount of the crop rated in good-to-excellent condition increased to 72% from 70%, the USDA said.

 

And DTN Meteorlogix reported widespread rains and warm temperatures in the U.S. Southern Plains will continue to favor early developing wheat

 

Technically, bears still have a downside advantage at CBOT and the Kansas City Board of Trade, a market technician said.

 

The next downside price objective for the bears is closing CBOT May wheat prices below solid support at Monday's low of US$4.51 1/2, the technician said. The bulls' next upside price objective is to close prices above solid resistance at US$4.70.

 

First resistance is seen at Monday's high of US$4.62 1/2 and then at US$4.65. First support lies at Monday's low of US$4.51 1/2 and then at US$4.50.

 

At KCBT, the bears' next downside objective is closing May prices below solid support at Monday's low of US$4.73 1/2. The bulls' next upside price objective is closing prices above solid chart resistance at US$4.90.

 

First resistance is seen at US$4.80 and then at US$4.85. First support is seen at Monday's low of US$4.73 1/2 and then at US$4.70.

 

In other news, Argentina's area dedicated to wheat is expected to be down sharply this year due to government intervention and increased fertilizer costs, according to farmers. The start Argentina's 2007-08 wheat planting season is just weeks away.

 

This month Argentina suspended the wheat export registry in an effort to ensure domestic supply and keep down local bread and pasta prices. In November, the Secretariat closed the export registry for corn in the face of surging export declarations.