April 3, 2008

 

US Wheat Outlook on Thursday: Firmer start seen on overnight, demand

 

 

U.S. wheat futures are expected to start Thursday's day session firmer on follow-through buying, with extra support seen from weather concerns and scattered demand news, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 10 to 12 cents per bushel higher. In overnight electronic trading, CBOT May wheat closed 12 cents higher at US$9.48 1/2.

 

The markets should feel early carryover support from gains overnight and from a rally Wednesday, an analyst said. Strength in neighboring CBOT corn and soy markets also should help boost wheat, he said.

 

Fresh demand news is seen as friendly to bulls, traders said. Turkey's state grain board, for one, issued a tender to buy 100,000 metric tonnes of optional-origin milling wheat, according to a report. The bidding deadline is April 10.

 

Last week, Turkey canceled a tender to buy 250,000 metric tonnes of U.S.-origin milling wheat. An official said at the time that the grain board was dissatisfied with quality of wheat that was offered.

 

The Taiwan Flour Millers Association, meanwhile, bought 40,000 tonnes of U.S. wheat, including 21,640 tonnes dark northern spring wheat and 9,830 tonnes of hard red winter, in a tender concluded Thursday. The shipment will arrive in Taiwan from June 18 to July 2.

 

Weekly U.S. wheat export sales of 388,300 tonnes were at the low end of trade expectations, which ranged from 300,000 to 700,000 tonnes. Net old-crop sales of 267,200 tonnes were 30% below the previous week but 3% above the prior four-week average, according to the U.S. Department of Agriculture.

 

Export sales of soft red winter wheat were 182,900 tonnes and represented the majority of the old-crop business, the USDA said. Egypt bought 85,000 tonnes of SRW wheat.

 

Old-crop cancellations and buybacks for the week were considered light at 30,100 tonnes. Forty-three weeks into the marketing year, total commitments are 99% of the USDA's target for the year.

 

Weather in some SRW wheat areas of the Midwest and Delta continues to look wet. Another round of heavy rain is on tap for the next few days in the Ohio River valley and in the middle and lower Mississippi River valley, DTN Meteorlogix said.

 

In the hard red winter wheat belt of the U.S. central and southern Plains, any significant rain during the next three to five days should mostly fall in the southeast areas and a little of the northeast, Meteorlogix said. Western areas are the most in need of rain.

 

The bulls' next upside price objective is to push and close CBOT July wheat, which represents the new crop, above major psychological resistance at US$10.00, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at this week's low of US$9.05, he said.

 

First resistance is seen at Wednesday's high of US$9.52 and then at US$9.72. First support lies at US$9.25 and then at Wednesday's low of US$9.16.