March 28, 2008

 

US Wheat Outlook on Friday: Seen down on profit-taking, positioning

 

 

Profit-taking and positioning ahead of key government crop reports are expected to press down U.S. wheat futures at the start of Friday's day session, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 10 to 15 cents per bushel lower. In overnight electronic trading, CBOT May wheat shed 14 3/4 cents to US$9.99 1/4.

 

Traders are booking some profits ahead of the weekend and the end of the month, a CBOT floor analyst said. They also are stepping to the sidelines before the U.S. Department of Agriculture issues estimates for prospective plantings and quarterly grain stocks Monday, he said.

 

The markets are eagerly awaiting Monday's reports amid uncertainty about farmers' plans for seeding corn, soybean and spring wheat, analysts said. The stocks report also will give an indication of how high wheat prices affected usage trends during the last quarter, an analyst said.

 

The USDA reports continue to be the main focus of the markets amid a lack of other fresh news, traders said. Weakness in outside markets like crude oil and gold also is adding pressure, they said.

 

CBOT July wheat, which represents the new crop, on Thursday closed near the session low. The bulls have "faded and are still in near-term technical trouble," a technical analyst said.

 

Bulls' next upside price objective is to push and close CBOT July wheat above solid resistance at this week's high of US$11.10, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below major psychological support at US$10.00, he said.

 

First resistance is seen at Thursday's high of US$10.40 and then at US$10.50. First support lies at Thursday's low of US$10.05 and then at US$10.00.

 

There is some potential for significant precipitation in wheat areas of the U.S. central and southern Plains during the next five to seven days, according to DTN Meteorlogix. However, the highest potential for moisture is in the east and not in the west, where rains are most needed, the private weather firm said.

 

In other news, China said it raised the minimum purchase price for wheat for the second time this year to encourage grain production and protect farmers' interests. The minimum purchase price for white wheat was increased to RMB1,540 per metric tonne from the adjustment to RMB1,500/tonne last month, while the minimum price for red and mixed wheat varieties was raised to RMB1,440/tonne from RMB1,400/tonne.

 

China started setting minimum purchase prices in 2004 to prevent farmers from suffering losses when market prices for grains are low. The government buys wheat from farmers at the minimum purchase prices when domestic prices fall below the minimum levels.