April 9, 2008

 

US Wheat Outlook on Wednesday: Seen firmer on follow-through, USDA report

 

 

U.S. wheat futures are expected to start Wednesday's day session firmer on follow-through buying and a bullish U.S. ending stocks estimate, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 5 to 10 cents higher. In overnight electronic trading, CBOT May wheat jumped 6 1/2 cents to US$9.40 1/2.

 

The U.S. Department of Agriculture, in its April supply and demand report, kept its estimate for 2007-08 U.S. wheat carryout at 242 million bushels, unchanged from March and below the average analyst estimate of 261 million. Analysts had been expecting to see an increase in carryout after the USDA last month pegged quarterly wheat stocks above trade estimates.

 

The USDA said feed and residual use is projected 50 million bushels lower as the March 1 stocks indicated lower-than-expected use in the December-February quarter. Exports, meanwhile, are projected 50 million bushels higher as export sales and shipments "remain strong with several major export competitors taxing or otherwise restricting shipments," the USDA said.

 

The report was not all bullish for wheat, as the agency projected a bearish increase in world carryout, traders said. The USDA pegged world wheat ending stocks at 112.5 million tonnes, up from 110.4 million in March.

 

"It's not a clear cut report," said Vic Lespinasse, analyst for Illinois Grain. "We're getting mixed signals."

 

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 last week's low of US$9.05, he said.

 

First resistance is seen at US$9.72 and then at US$10.00. First support lies at Tuesday's low of US$9.33 and then at US$9.05.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing and closing July wheat above solid technical resistance at last week's high of US$10.50, the technical analyst said. The bears' next downside objective is pushing and closing prices below solid support at last week's low of US$9.55.

 

First resistance is seen at Tuesday's high of US$10.03 and then at US$10.25. First support is seen at this week's low of US$9.81 and then at US$9.75.

 

Looking at the weather, there appears to be a chance for widespread rain to occur through the U.S. Plains hard red winter wheat belt, DTN Meteorlogix said in a forecast. However, the long-range outlook looks drier again, so if the dry western Plains miss the upcoming chance of rain, "it may be awhile before there is another one," the private weather firm said.