April 9, 2007

 

US Wheat Outlook on Monday: 18-20 cents up on crop-damage fears, e-CBOT

 

 

U.S. wheat futures are called to open sharply higher Monday after strong gains overnight and amid continued concerns about the affect of cold weather on the developing crop, analysts said.

 

Benchmark Chicago Board of Trade May wheat is called to open 18 to 20 cents higher per bushel.

 

In e-cbot trading, CBOT May wheat was 20 3/4 cents higher at US$4.65 3/4.

 

Freezing temperatures descended on winter wheat-growing areas during the weekend and likely damaged the crop in some areas, analysts and traders said.

 

"A weather market in wheat has developed amid very cold temperatures forecast in the coming days for the Plains states, which did produce a yield-impacting freeze over the weekend," one analyst said.

 

In Kansas, the country's top wheat-producing state, a hard freeze may have hurt any jointed wheat, according to DTN Meteorlogix. A frost or light freeze occurred through Oklahoma and north-central Texas and likely damaged any heading or flowering wheat, the weather firm said.

 

Nebraska wheat growers, uneasy about the latest arctic chill, were studying temperature readings and crop costs to decide whether to keep their crops or switch to corn, according to news reports.

 

A hard freeze also occurred in the eastern Midwest, Meteorlogix said, and any jointing wheat may have been damaged.

 

A widespread frost or light freeze occurred in the southeastern U.S. as far south as southern Alabama and southern Georgia, with a hard freeze reported through the Carolinas and Virginia, according to Meteorlogix. This event has likely caused damage to any emerged and flowering crops, the firm said.

 

In the Delta, temperatures sunk to 28 degrees to 31 degrees Fahrenheit. Any flowering wheat was likely hurt, Meteorlogix said.

 

Worries about the impact of the cold on the winter wheat crop boosted CBOT wheat futures in overnight trading and should continue to do so in the day session, analysts said. Follow-through buying is expected, along with new buying as more information comes out about the condition of the winter crop, a CBOT floor trader added.

 

There also may be technical support from prices, a technical analyst noted.

 

CBOT May wheat prices Thursday closed near mid-range but did close at the weekly high close, which is a bullish technical clue. The market could be producing a bullish V-bottom reversal pattern on the daily bar chart, the technical analyst said.

 

The agricultural markets were closed Friday for the Easter weekend.

 

Bulls' next upside price objective is to close prices above solid resistance at US$4.55, which would fill on the upside a downside price gap on the daily bar chart. The next downside price objective for the bears is closing prices below solid support at US$4.25.

 

First resistance is seen at Thursday's high of US$4.50 and then at US$4.55. First support lies at Thursday's low of US$4.37 and then at US$4.30.

 

Non-commercial speculative traders cut long CBOT wheat futures and options positions by 8,493 lots and raised short positions by 3,737 lots in the week ended April 3, according to the Commodity Futures Trading Commission supplemental report. The speculative traders were net short 38,373 contracts.

 

Index traders increased longs by 135 positions and shorts by 912 positions, the CFTC said. They were net long 192,718 contracts.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing May prices above solid chart resistance at US$4.80. The bears' next downside objective is closing prices below solid support at US$4.50.

 

First resistance is seen at Thursday's high of US$4.72 1/2 and then at US$4.78. First support is seen at US$4.64 and then at Thursday's low of US$4.61.

 

Speculative traders cut KCBT longs by 4,191 lots and lifted shorts by 4,008 lots, the CFTC said. They were net long 16,375 contracts. Index traders decreased longs by 1,523 and lifted shorts by 367, the CFTC said. They were net long 25,410 positions.

 

In international markets, China's wheat prices were steady in the week to Monday, and analysts said they expect no big change before new supply arrives in the market at the end of May. Prices of average-quality wheat in Henan province were little changed from a week ago around RMB1,540 a metric tonne.

 

Looking ahead, the U.S. Department of Agriculture is expected to trim 2006-07 U.S. wheat carryout in its April supply and demand report because of increased feed usage, analysts said. The report is due out at 8:30 a.m. EDT (1230 GMT) Tuesday.

 

According to a Dow Jones Newswires survey of 12 analysts, the average expectation for April carryout is 449 million bushels, compared to March carryout of 472 million.