April 24, 2008

 

US Wheat Outlook on Thursday: Heading lower on technical downtrend

 

 

U.S. wheat futures are poised to extend their recent downtrend at the start of Thursday's day session on technical weakness and the potential for increased global production, analysts said.

 

Chicago Board of Trade July wheat is called to open 6 to 8 cents per bushel lower. In overnight electronic trading, CBOT July wheat tumbled 9 cents to US$8.22 1/2.

 

Bears have solid downside technical momentum on their side in the wheat markets after recent setbacks, traders said. CBOT July wheat, which represents the new crop, is down more than US$4.50 from its high last month and overnight fell to its lowest price since Jan. 14.

 

"Prices are still in a six-week-old downtrend on the daily bar chart," a technical analyst said.

 

Total weekly wheat export sales of 272,000 tonnes were nothing to get excited about, traders said. Analysts were expecting sales of 200,000 tonnes to 400,000 tonnes.

 

Net old-crop sales of 158,000 tonnes were 22% above the previous week but 49% under the prior four-week average, according to the U.S. Department of Agriculture. Old-crop cancellations are buybacks were 41,800 tonnes, the USDA said.

 

In other export news, Japan said it bought 86,000 tonnes of wheat, including 20,000 tonnes of U.S. dark northern spring wheat and 20,000 tonnes of semi hard wheat, in a routine tender. The shipment is expected to arrive June 11 and July 10.

 

The upcoming winter wheat harvest in the northern hemisphere continues to be a bearish force for the markets, an analyst said. There are ideas world production will be strong after farmers expanded plantings due to high prices.

 

There are no major weather concerns about the U.S. crop, an analyst said. Recent rainfall in the central and southern Plains has favored spring growth of hard red winter wheat, but more rain is still needed in western areas, DTN Meteorlogix said.

 

"It looks cold during the weekend but not cold enough far enough to the south to hurt wheat," Meteorlogix said in a forecast. "However, this does bear watching."

 

In spring wheat areas of the northern Plains, recent rainfall has helped recharge soil moisture, Meteorlogix said. Cold, damp weather may slow field work in preparation for planting spring wheat, the private weather firm said.

 

The bulls' next upside price objective is to push and close CBOT July wheat above solid technical resistance at this week's high of US$8.75, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below major psychological support at US$8.00.

 

First resistance is seen at Wednesday's high of US$8.55 and then at US$8.75. First support lies at Wednesday's low of US$8.23 and then at US$8.00.