April 2, 2007

 

US Wheat Outlook on Monday: 11-13 cents down amid heavy selling in corn

 

 

U.S. wheat futures are expected to start Monday's day session lower, under continued pressure from heavy selling in the neighboring corn market, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 11 to 13 cents lower per bushel.

 

In e-cbot trading, CBOT May wheat was down 11 cents at US$4.27.

 

CBOT corn futures were limit down, or 20 cents lower, overnight after closing limit down Friday. With prices locked at that position, traders said they expect to see ongoing spillover selling in wheat.

 

CBOT corn has been on the defensive after the U.S. Department of Agriculture on Friday released prospective plantings estimates that pegged U.S. corn acreage at a higher-than-expected level. U.S. farmers this spring are expected to plant the most corn since 1944, the USDA said.

 

Wheat will continue to look to corn for direction and does not have enough fundamental or technical strength to rally higher on its own, analysts said. The corn market should trade above limit down by the end of the session, which may give wheat some "breathing room" and allow it to trim losses, a commission house analyst said.

 

The next downside price objective for the bears is closing CBOT May prices below solid support at US$4.17, a technical analyst said. Bulls' next upside price objective is to close prices above solid resistance at Friday's high of US$4.50.

 

First resistance is seen at US$4.40 and then at US$4.45. First support lies at Friday's low of US$4.31 and then at US$4.25.

 

"Serious near-term chart damage has been inflicted on wheat, including more on Friday," the technical analyst said.

 

The bears' next downside objective is closing Kansas City Board of Trade May prices below solid support at Friday's low of US$4.45, the technical analyst said. Bulls' next upside price objective is closing prices above solid chart resistance at US$4.66, which would fill on the upside Friday's downside price gap on the daily bar chart.

 

First resistance is seen at Friday's high of US$4.64 and then at US$4.66. First support is seen at US$4.50 and then at Friday's low of US$4.45.

 

Index traders increased long and short CBOT and KCBT wheat futures and options positions in the week ended March 27, according to the Commodity Futures Trading Commission supplemental report. Index traders lifted long CBOT wheat positions by 1,136 lots and shorts by 205 lots. They were net long 193,495 contracts.

 

At the KCBT, index traders increased long positions by 394 lots and shorts by 72 lots, the CFTC said. They were net long 27,300 contracts.

 

Fundamentally, wet weather in the U.S. Southern Plains has been beneficial for developing winter wheat recently and bearish for prices, an analyst said. DTN Meteorlogix reported that widespread rains and thunderstorms in the area will maintain soil moisture for spring growth of winter wheat, although colder weather late this week or during the weekend may bring a frost to areas as far south as Oklahoma.

 

A colder period also looks to be on tap for the eastern Midwest, according to Meteorlogix. A freeze is possible into southern Missouri and the lower Ohio River valley by the end of the week, the weather firm said.

 

"Wheat development should be set back," Meteorlogix said.

 

Major winter wheat areas of the Ukraine have be drier and warmer recently, which favors early spring field work and greening of the crop, Meteorlogix said. Most of the region will need rain to support favorable development of wheat during the coming weeks, the weather firm added.

 

The Ukrainian government doesn't intend to impose any limitations on grain export in the 2007-2008 marketing year, the government press office said. Ukraine exported 2.4 million metric tonnes of wheat harvested in 2006 to March 29, compared with 4.6 million tonnes a year earlier, according to the Agriculture Ministry.

 

Ukraine planted spring wheat on 316,000 hectares to March 30, 71% of the planned total area.

 

In Argentina, '06-'07 wheat sales totaled 8.805 million metric tonnes as of March 30, unchanged from two weeks ago, according to the Agriculture Secretariat's latest data. By this time last year Argentina had sold 5.72 million tonnes of '05-'06 wheat.

 

In other news, China's wheat prices continued to remain largely stable in the week to Monday, as both the supply and demand sides saw little change. Prices of average-quality wheat in Henan province were around RMB1,540 a metric tonne, unchanged from a week ago.