March 28, 2007

 

US Wheat Outlook on Wednesday: 1-2 cents higher on overnight, short covering

 

 

U.S. wheat futures are expected to start Wednesday's day session firmer on carryover buying from the overnight and with some short-covering ahead of the release of new government crop estimates, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 1 to 2 cents higher per bushel.

 

In e-cbot trading, CBOT May wheat was up 2 cents at US$4.56, while CBOT July wheat was up 1 1/4 cents at US$4.69 1/4.

 

The gains overnight came in a rebound from losses Tuesday, and follow-through buying is expected at the opening, floor traders said.

 

Some traders had expected to see the bounce in prices on Tuesday after losses Monday, a Kansas City Board of Trade floor trader noted. Instead, Turnaround Tuesday could actually arrive on Wednesday, he said.

 

Market participants are expected to even up some positions ahead of the release of the U.S. Department of Agriculture's planting intentions and grain stocks reports, due out at 8:30 a.m. EDT Friday. Trading should be choppy amid short-covering and an absence of other fundamental news for wheat, analysts said.

 

Recent rains in the U.S. Southern Plains have been beneficial for hard red winter wheat fields and fundamentally bearish for prices, analysts noted. DTN Meteorlogix reported widespread rains and warm temperatures will continue to favor early developing wheat.

 

Another feature for the day session will likely be strength in outside energy markets amid rising tensions in the Middle East, an analyst added. Gains in crude oil should lend support to CBOT corn and soybeans, which may in turn provide some spillover strength for wheat, he said.

 

On the technical side, bears still have the near-term advantage at the CBOT and KCBT, a technical analyst said.

 

The next downside price objective for the bears is closing CBOT May prices below solid support at US$4.50, he said. The bulls' next upside price objective is to close prices above solid resistance at US$4.70.

 

First resistance is seen at Tuesday's high of US$4.59 1/2 and then at this week's high of US$4.62 1/2. First support lies at Tuesday's low of US$4.51 1/4 and then at US$4.50.

 

At the KCBT, the bears' next downside objective is closing May prices below solid support at the September 2006 low of US$4.56, the technical analyst said. The bulls' next upside price objective is closing prices above solid chart resistance at US$4.90 a bushel.

 

First resistance is seen at US$4.75 and then at Tuesday's high of US$4.78. First support is seen at Tuesday's low of US$4.69 and then at US$4.65.