May 14, 2007

 

US Wheat Outlook on Monday: 1-2 cents higher, taking cue from overnight

 

 

U.S. wheat futures are expected to start Monday's day session slightly higher on follow-through buying from the overnight but with spillover pressure seen from weakness in corn, analysts said.

 

Benchmark Chicago Board of Trade July wheat is called to open 1-2 cents higher per bushel.

 

In e-cbot trading, CBOT July wheat rose 3/4 cent to US$4.93 3/4.

 

There remain concerns about tight global wheat stocks after the U.S. Department of Agriculture on Friday pegged the world's 2007-08 carryover at 113.4 million tonnes, down 6% from 2006-07 and at its lowest level since 1981-82.

 

However, seasonal tendencies for wheat prices to slump going into harvest may help keep a lid on any advances, especially if corn drifts lower, a CBOT floor trader said. The U.S. hard red winter wheat crop also looks like it is rebounding well after an early spring freeze, he added.

 

DTN Meteorlogix reported favorable weather should return to the U.S. Southern Plains this week, with thundershowers and cooler conditions seen on Monday and Tuesday. Drier weather in Argentina during the next seven days will help improve conditions for winter wheat planting, Meteorlogix said.

 

Argentina's farmers kicked off 2007-08 wheat planting last week with area dedicated to the crop expected to be down 7% from last year, according to the Buenos Aires Cereals Exchange. Farmers are expected to plant 5.16 million hectares of wheat this year, compared with 5.55 million hectares a year ago, because of low domestic price for wheat and high fertilizer costs.

 

In China, the North China Plain continues drier than normal and sometimes fairly hot during the next seven days, increasing stress to winter wheat, according to Meteorlogix.

 

Wheat prices in China were slightly lower in the two weeks to Monday, with stocks sufficient as the harvest season approaches. Prices of average-quality wheat in Henan province were at RMB1,440-RMB1,520 a metric tonne compared with RMB1,490-RMB1,520 before the Labor Day holiday.

 

In the Ukraine, any shower activity during the next seven to 10 days looks to be mostly light and mainly confined to the west, Meteorlogix said. Rainfall is needed to ease stress to winter wheat, the weather firm said.

 

Australia, meanwhile, should see some showers during the week, with precipitation heaviest over New South Wales, according to the firm. Most areas still need rain to help replenish soil moisture for early wheat growth, Meteorlogix said.

 

The bulls' next upside price objective is to close CBOT July wheat above solid resistance at US$5.00, a market technician said. The next downside price objective for the bears is closing prices below solid support at last week's low of US$4.78.

 

First resistance is seen at Friday's high of US$4.98 1/2 and then at US$5.00. First support lies at US$4.90 and then at US$4.85.

 

Non-commercial speculative traders cut long and short CBOT wheat futures and options positions in the week ended May 8, the Commodity Futures Trading Commission said Friday in a supplemental report. The traders decreased longs by 4,127 lots and shorts by 2,546 lots, and were net short 8,282 contracts.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing prices above solid chart resistance at US$4.90, the technician said. The bears' next downside objective is closing prices below solid support at last week's low of US$4.71.

 

First resistance is seen at US$4.80 and then at Friday's high of US$4.85. First support is seen at US$4.71 and then at US$4.69.

 

Non-commercial speculative traders trimmed long KCBT wheat positions by 303 lots, lifted shorts by 54 lots, and were net long 9,112 contracts, the CFTC said in another supplemental report.