April 20, 2007

 

US Wheat Outlook on Friday: Up 4-6 cents; e-CBOT, bullish fundamental theme

 

 

U.S. wheat futures are seen starting Friday's day session on firm footing, following the lead of overnight price action, with worries over crop conditions remaining an underpinning theme, analysts said.

 

In overnight electronic trading, Chicago Board of Trade May wheat was 6 cents higher at US$5.02 and CBOT July wheat was 6 1/4 cents higher at US$5.14.

 

The market continues to feed off a bullish fundamental story, with worries associated with freeze damage to U.S. winter wheat, and talk of drought concerns for Australia and Ukraine adding to the supportive theme, analysts said.

 

The production concerns are raising fears of tightening world stock-to-use ratios, with supportive chart formations and speculative traders scrambling to cover short positions, leaving futures poised to continue an upside theme, a CBOT floor analyst added.

 

Nevertheless, end-of-the-week position evening may arise to temper upside momentum during the session, a trader added.

 

A market technician said wheat bulls have regained solid upside technical momentum. The next upside price objective for CBOT July wheat is to close prices above solid resistance at the contract high of US$5.18 a bushel. The next downside price objective for is closing prices below solid support at US$4.85 a bushel.

 

First resistance is seen at Thursday's high of US$5.09 and then at US$5.18. First support lies at US$5.00 and then at Thursday's low of US$4.95.

 

The DTN Meteorlogix Weather Service forecast said dry conditions or with only a few very light showers are on tap for the U.S. southern Plains on Friday and most of Saturday. Showers and thunderstorms late Saturday and Sunday are especially likely for western and northern locations, with less through the southeast areas. Rainfall potential through the west and north is 0.50-1.50 inches and locally heavier with severe storms expected. Temperatures will average near to mostly above normal.

 

In Australia, planting season is approaching for the next winter wheat crop. Rain is needed through much of this region to replenish soil moisture and irrigation and to recover from long-term drought conditions. Showers are possible during the weekend and next week but these are expected to be mostly light and mostly in the west and south wheat belt, Meteorlogix forecasts.

 

In Ukraine, more rain is needed but is not likely during the next 10 days. Also, it will turn colder during the next few days, slowing development of wheat, Meteorlogix reports.

 

In demand news, Jordan's Ministry of Trade and Industry Friday said it bought 50,000 metric tonnes of Syrian wheat, on a free-on-truck basis. Tunisia's state-run Office Des Cereales Friday said it bought 75,000 metric tonnes of soft wheat for shipment during May and June, on a cost and freight basis.

 

In world wheat news, wheat purchases in 2007 by India's federal government from farmers as of Friday are estimated at 4.5 million metric tonnes, down 32.8% from 6.7 million tonnes a year earlier, a senior government official said.