April 7, 2008

 

US Wheat Outlook on Monday: Mixed to start; MGE may rally continues

 

 

U.S. wheat futures are expected to start Monday's day session mixed, as the nearby Minneapolis Grain Exchange contract continues to surge on short-covering and spreading, traders said.

 

In overnight electronic trading, Chicago Board of Trade May wheat was up 3/4 cent at US$9.75, while CBOT July wheat was down 4 cents at US$9.87 1/2. Kansas City Board of Trade May wheat fell 7 1/2 cents to US$10.21, while MGE May wheat rose the exchange-imposed limit of 60 cents to US$13.95.

 

MGE May wheat has closed limit up for the past three day sessions, with short hedgers getting out of the market well ahead of first notice day, a trader said. Market participants do not want to see a repeat of what happened with the MGE March contract in late February, when holders of short positions became trapped, he said.

 

The CBOT and KCBT will likely keep an eye on the rally in MGE May wheat, although the markets should stumble after trading mostly lower overnight, traders said. The markets may step back a bit amid ideas that gains Friday were overdone a bit, they said.

 

"CBOT July wheat prices Friday closed solidly higher and near the session high," a technical analyst said. "Prices also closed at a bullish weekly high close. Prices are still in a three-week-old downtrend on the daily bar chart, however."

 

The bulls' next upside price objective is to push and close CBOT July wheat above major psychological resistance at US$10.00, the analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$9.50.

 

First resistance is seen at Friday's high of US$9.95 and then at US$10.00. First support lies at US$9.75 and then at US$9.50.

 

The U.S. Department of Agriculture at 4 p.m. EDT Monday will issue its first weekly crop progress report of the year. Traders are waiting to see how the agency rates the wheat amid concerns about dryness in the western Plains and excessive moisture in parts of the Midwest.

 

A couple of disturbances coming out of the western U.S. will bring precipitation to the winter wheat belt in the central and southern Plains, DTN Meteorlogix said in a forecast. Central and eastern areas should do well this week, although the west should remain on the dry side, the private weather firm said. Another wet or very wet period is expected this week in the eastern Midwest and Delta, Meteorlogix said.

 

In other news, India's 2008 wheat production is likely to reach the targeted 74.81 million metric tonnes despite recent rain and hailstorms in some key growing provinces, the federal farm secretary said. He said the government was still assessing the impact of damage, using input from affected provinces.

 

India may buy 180,000 tonnes of wheat in the next six months by exercising a call option in the global markets, another government official said this weekend. In a call option tender, a specified quantity of commodity is purchased at a predetermined price within a given timeframe.