April 17, 2008

 

US Wheat Outlook on Thursday: Seen firmer on follow-through, weather

 

 

Follow-through buying and scattered weather concerns are expected to support 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 up 9 to 12 cents per bushel higher. In overnight electronic trading, CBOT May wheat was up 13 1/2 cents at US$9.38.

 

Wheat was firmer overnight after a strong close Wednesday. The markets could see more follow-through buying as part of a technical bounce after recent weakness, a CBOT floor analyst said. Gains in the neighboring CBOT corn and soybean markets also could help support wheat, he said.

 

There is some bullish chatter about the potential for a damaging cold snap in the U.S. Plains, a trader said. Industry members are paying close attention to the possibility for cold weather after a spring freeze cut hard red winter wheat production last year.

 

However, "a wheat freeze is not foreseen," T-Storm Weather said in a forecast. There also is some concern about continued wet weather in soft red winter wheat areas of the Midwest, a trader said.

 

There is not much other news out, traders said, and the markets would like to see some export business. Japan bought 88,000 metric tonnes of wheat, including 21,000 tonnes of U.S. dark northern spring wheat and 21,000 tonnes of U.S. semi hard wheat, in a routine tender.

 

Total weekly wheat export sales of 308,400 tonnes were considered weak as analysts' expectations ranged from 450,000 to 750,000 tonnes. Net old-crop sales of 129,200 tonnes were 72% below the previous week and 54% under the prior four-week average, according to the U.S. Department of Agriculture.

 

Top buyers of old-crop wheat for the week ended April 10 were Indonesia, which took 58,000 tonnes, and Colombia, which bought 37,500 tonnes. Old-crop cancellations and buybacks were 40,300 tonnes, the USDA said.

 

The bulls' next upside price objective is to push and close CBOT July wheat above solid technical resistance at US$9.50, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at this week's low of US$9.00 a bushel.

 

First resistance is seen at Wednesday's high of US$9.40 and then at US$9.50. First support lies at US$9.10 and then at US$9.00.

 

In other news, Strategie Grains pegged the European Union's grain harvest at 289 million tonnes, a decline of 2 million tonnes its estimate last month. Dry weather conditions are expected to affect yields of barley and corn in Spain, Romania and Cyprus, according to the report. The estimate for soft wheat production was only lowered slightly.

 

Turkey's agriculture minister, meanwhile, said he expects 2008 wheat output to rise more than 10% on year after dry weather cut production in 2007, according to a report. The Union of Turkish Agricultural Chambers said earlier this month that Turkey's wheat production may fall 30% in 2008 if the drought continues.