April 11, 2007

 

US Wheat Outlook on Wednesday: 2-4c Higher on freeze concerns, momentum

 

 

U.S. wheat futures are called to open 2 to 4 cents higher per bushel Wednesday on momentum from overnight advances and continued fears about damage to the winter wheat crop from a recent freeze, traders said.

 

In e-cbot trading, Chicago Board of Trade May wheat was 4 1/2 cents higher at US$4.62 1/4, and CBOT July wheat was up 1/2 cent at US$4.74 1/2.

 

Worries that a severe cold snap during the weekend hurt developing U.S. winter wheat remain supportive to prices, a CBOT floor trader said. The extent of the damage is still unclear, although the trade should begin to get a more accurate idea about it by the end of the week, he added.

 

Initial reports have indicated damage appears to be widespread.

 

"It's likely that significant damage was inflicted on the U.S. wheat crop over the cold weekend," a technical analyst said. "And now the forecast is calling for another potential freeze in the region in the coming days."

 

DTN Meteorlogix reported rainfall in the Southern Plains during the coming days may help some hard red winter wheat recover from the freeze. Snow will likely delay field work, but should not be damaging to jointing wheat in the west and north, the weather firm said.

 

In the Delta, rainfall chances increase, helping to replenish soil moisture supplies after recent dry weather, Meteorlogix said. Damage due to the recent freeze will continue to be assessed during the coming week, the firm added.

 

Major winter wheat areas of the Ukraine are expected to be mostly dry or see only light precipitation during the next 10 days, Meteorlogix said. Rain is needed to support favorable spring growth of wheat.

 

Some increase in shower activity is possible in China during the next three to five days, according to the weather firm. Long-range charts suggest a heavier rainfall potential for the southern and far eastern areas, and rainfall is needed to support jointing to heading winter wheat in the western areas, Meteorlogix said.

 

Prices of imported corn and wheat in Asia may rise through the rest of this week, tracking the likely strength in CBOT futures, analysts said. Since corn and wheat can both be used as livestock feed ingredients, any rise in wheat prices increases corn demand and prices, they added.

 

The bulls' next upside price objective is to close CBOT July prices above solid resistance at this week's high of US$4.88 1/2, the technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$4.60.

 

First resistance is seen at Tuesday's high of US$4.77 1/2 and then at US$4.80. First support lies at US$4.70 and then at Tuesday's low of US$4.65.

 

Kansas City Board of Trade July wheat also appears to have some technical strength, the analyst said. A bullish V-bottom reversal pattern has formed on the daily bar chart to strongly suggest a market low is in place, he said.

 

The bulls' next upside price objective is closing KCBT July prices above solid chart resistance at this week's high of US$4.95. The bears' next downside objective is closing prices below solid support at US$4.59 1/4.

 

First resistance is seen at Tuesday's high of US$4.83 3/4 and then at US$4.90. First support is seen at Tuesday's low of US$4.72 1/2 and then at this week's low of US$4.66.