May 1, 2008

 

US Wheat Outlook on Thursday: Seen firmer on technical buying

 

 

U.S. wheat futures are expected to start Thursday's day session higher on technical buying, although there is little fresh fundamental news to support a rally, analysts said.

 

CBOT July wheat is called to open 3 to 6 cents higher per bushel. In overnight electronic trading, CBOT July wheat closed up 6 cents at US$8.07.

 

Although prices were firmer overnight, wheat markets still look technically weak, analysts said. Fundamentals also look bearish amid expectations that the Northern Hemisphere's approaching harvest will be large, they said.

 

"This is just a market that's in trouble," said Chad Henderson, analyst for Prime Agricultural Consultants. "The path of least resistance is trading sideways to lower."

 

Total weekly wheat export sales of 499,200 metric tonnes were within trade expectations, which ranged from 250,000 to 550,000 tonnes. It was "encouraging" that new crop sales picked up from recent weeks, with business of 323,100 tonnes, Henderson said.

 

Old crop sales were 176,100 tonnes, according to the U.S. Department of Agriculture. Cancellations and buybacks were 71,400 tonnes.

 

In other news, Argentina's farmers and the government reached an agreement to open up wheat exports, farm leaders said. The date and amount of wheat to be freed for export wasn't specified.

 

Wheat exports have been closed since November. However, the resumption of exports from Argentina shouldn't have a major impact on U.S. wheat futures because the market is already preparing for an influx of new supply from the upcoming harvest, Henderson said.

 

Traders are keeping an eye on the weather, with forecasts for cold temperatures in the central and southern Plains. There could be a frost in wheat areas this weekend as far south as the northern Texas Panhandle and southeast Kansas, DTN Meteorlogix said in a forecast.

 

A freeze appears likely for eastern Colorado, northwest Kansas, southwest Kansas, and southwest Nebraska, Meteorlogix said. Conditions will probably not be cold enough to harm wheat in the jointing stage but it does bear watching, the private weather firm said.

 

In the northern Plains, rainfall continues to build moisture to support spring growth of recently planted spring wheat, Meteorlogix said. However, cold weather may threaten some newly emerged wheat during the weekend and Monday, the 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$8.43, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below psychological support at US$8.00, he said.

 

First resistance is seen at Wednesday's high of US$8.14 and then at US$8.25. First support lies at US$8.00 and then at the January low of US$7.74.