April 18, 2007

 

US Wheat Outlook on Wednesday: Steady-1 cent higher on e-CBOT momentum

 

 

U.S. wheat futures are expected to start Wednesday's day session steady to 1 cent per bushel higher after prices ended overnight trading flat to slightly firmer, traders said.

 

In e-cbot trading, CBOT May wheat rose 1/4 cent to US$4.77 3/4, and CBOT July wheat finished unchanged at US$4.90 3/4.

 

The recent cold snap in the Plains is still an underlying bullish factor for wheat, although veteran traders know wheat is a very resilient plant and can recover from extreme stress, a technical analyst said. Prices will continue to react to field assessments of the damage in the coming days, he said.

 

For others, however, it appears the wheat markets have already built in enough weather premium after the recent hard freeze hit the winter wheat crop.

 

"How much more are we going to kill a dead crop?" asked Chad Henderson, analyst with Prime Agricultural Consultants.

 

Bulls' next upside price objective is to close CBOT July wheat above solid resistance at Tuesday's high of US$5.03, the technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$4.70.

 

First resistance is seen at US$4.95 and then US$5.00. First support lies at Tuesday's low of US$4.87 and then at US$4.82 1/2.

 

CBOT July wheat will likely have trouble moving above US$5 as it seems that is historically the price level that starts scaring off buyers, Henderson added.

 

At the Kansas City Board of Trade, the market is looking "a little toppy," a floor trader said. KCBT July prices closed nearer the session low Tuesday and scored a bearish "outside day" down on the daily bar chart, the technical analyst noted.

 

"Bulls were disappointed the market sold off despite a bullish drop in wheat ratings in the crop progress reports," the analyst said. "When a market cannot rally on fresh bullish news, that is a major concern for the bulls, and a sign the market has hit a peak."

 

Bulls' next upside price objective is closing KCBT July prices above solid chart resistance at Tuesday's high of US$5.00. The bears' next downside objective is closing prices below solid support at US$4.80.

 

First resistance is seen at US$4.95 and then at US$5.00. First support is seen at Tuesday's low of US$4.86 and then at US$4.83.

 

Looking at the weather, the five-day period is shaping up to be warmer in the U.S. Southern Plains with showers mainly for the east, according to DTN Meteorlogix. The six- to 10-day period still looks wet and cool, which will help wheat recover from the early April freeze, Meteorlogix said.

 

Overseas, major winter wheat areas of the Ukraine may see some light precipitation during the next few days but not enough to reverse a recent drying trend, according to the weather firm. Rain is also needed through much of Australia's winter wheat regions to replenish soil moisture and irrigation and to recover from long-term drought conditions, Meteorlogix said.

 

In China, episodes of rain and showers will favor reproductive to filling wheat through the southern part of the North China Plain, Meteorlogix said. Northern areas could use a little more rain, the weather firm said.

 

Ideas about potential global production problems could be friendly to prices, but it is a little early to get worried about the dryness, a CBOT floor trader said.

 

In other news, the Taiwan Flour Millers Association bought 35,000 metric tonnes of U.S. No. 1 wheat from trading house Columbia Grains in a tender concluded Wednesday, an association official said. The shipment is scheduled to arrive in Taiwan between May 22 and June 5.

 

French wheat ending stocks, meanwhile, will stop their decline if the 2007-08 crop continues to progress well, according to the French state grains board L'Office National Interprofessionnel des Grandes Cultures. However, carryout will still be close to in 2006-07, which is forecast to be down 26% from 2005-06, the board's managing director said.