April 10, 2008

 

US Wheat Outlook on Thursday: 10-15 cents up on spillover, follow-through

 

 

Follow-through buying and spillover strength from other markets are expected to boost U.S. wheat futures at the start of Thursday's day session, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 10 to 15 cents per bushel higher. In overnight electronic trading, CBOT May wheat surged 16 1/2 cents to US$9.50 1/2.

 

Wheat should find support from gains in the neighboring CBOT soy and corn markets, traders said. Weakness in the U.S. dollar and rallies in outside markets, including crude oil and gold, will add to bullish tone, they said.

 

Firm outside markets on Wednesday "did limit selling interest in a bearish wheat market and they will continue to have a major influence in the grains," a technical analyst said.

 

Weekly U.S. wheat export sales, including old-crop and new-crop business, were 763,600 tonnes, above analyst expectations of 300,000 to 750,000 tonnes. The export sales were 70% above the previous week, according to the USDA.

 

Net old crop export sales were 454,200 tonnes, the USDA said. Top buyers of old-crop wheat included Algeria, which took 127,400 tonnes, and Nigeria, which bought 75,200 tonnes. Old-crop cancellations and buybacks were minimal at 48,100 tonnes.

 

There remain concerns about dryness in parts of the hard red winter wheat belt of the U.S. Plains, a CBOT floor analyst said. Rains on Wednesday and Thursday will help improve the condition of wheat, but colder weather will still slow growth of the plants, DTN Meteorlogix said. In soft red winter wheat areas of the Delta, rain and cold temperatures during the coming days will be unfavorable for jointing to heading wheat, the private weather firm said.

 

The bulls' next upside price objective is to push and close CBOT July wheat above major psychological resistance at US$10.00, the 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 Wednesday's high of US$9.73 and then at US$10.00. First support lies at US$9.33 and then at Wednesday's low of US$9.14.

 

In other news, Argentine wheat exports remain blocked, despite the government's most recent notice to exporters which indicated that the export registry would reopen this week, analysts said. The wheat export registry remains closed and the sector is waiting for a new regulation to open it, one analyst said.

 

Concerns about a revival of a farmers' strike in Argentina are helping to support CBOT grains and soybeans, a CBOT trader said. Argentine farm groups went on strike for 21 days last month, blocking roads across the country to prevent the transport of agricultural goods.

 

Japan, meanwhile, said it bought 70,000 tonnes of wheat, including 12,000 tonnes of U.S. semi-hard wheat and 8,000 tonnes of U.S. dark northern spring wheat, in a routine tender concluded Thursday. The shipment is expected to arrive between April and June.