May 21, 2007

 

US Wheat Outlook on Monday: 3-5 cents up on follow-through from overnight

 

 

U.S. wheat futures are expected to start Monday's day session modestly firmer amidst follow-through buying from overnight gains but with ongoing pressure seen from the advancing harvest, analysts said.

 

Benchmark Chicago Board of Trade July wheat is called to open 3-5 cents higher per bushel. In e-cbot overnight trading, CBOT July wheat rose 5 3/4 cents to US$4.77.

 

Despite the overnight gains, it will be hard for wheat to rally as the harvest of U.S. winter wheat approaches, an analyst said. Prices have a tendency to slump as the new crop gets close to coming online, he added.

 

There could, however, be some lingering support from a sale to Egypt during the weekend, an analyst said. Egypt's state-owned General Authority for Supply Commodities, or GASC, said during the weekend it bought 60,000 metric tonnes of U.S. soft red wheat as part of a 120,000 tonne tender. The rest of the tender was Russian and/or Kazakhstan wheat.

 

GASC last purchased wheat May 17 when it bought 120,000 tonnes of Russian and/or Kazakhstan wheat for delivery up to July 15. There was disappointment that the U.S. didn't win any of that business, so the new tender is seen as mildly friendly, an analyst said.

 

As for exports to India, Hamburg-based Alfred C. Toepfer has emerged as the lowest bidder in an Indian government tender to import up to 1 million metric tonnes of wheat, quoting around US$267/tonne, a senior food ministry official said. There were seven bids, ranging from US$267 to US$302 per tonne, for the wheat import tender, issued on behalf of the government-owned State Trading Corp., he said.

 

The next downside price objective for the bears is closing CBOT July prices below solid support at US$4.60, a technical analyst said. Bulls' next upside price objective is to close prices above major psychological resistance at US$5.00.

 

First resistance is seen at US$4.78 and then at US$4.85. First support lies at Friday's low of US$4.70 1/2 and then at US$4.65.

 

Non-commercial speculative funds trimmed long CBOT wheat futures and options positions and increased short positions in the week ended May 15, the Commodity Futures Trading Commission said in a supplemental report. The funds cut longs by 408 lots and lifted shorts by 2,297 lots, according to the report. They are net short 10,987 contracts.

 

At the Kansas City Board of Trade, the bears' next downside objective is closing prices below solid support at US$4.50, the technical analyst said. Bulls' next upside price objective is closing prices above solid chart resistance at last week's high of US$4.93.

 

First resistance is seen at US$4.70 and then at US$4.75. First support is seen at US$4.65 and then at US$4.60.

 

Speculative funds boosted long and short KCBT wheat futures and options positions, according to a CFTC supplemental report. The funds increased longs by 1,153 lots, shorts by 2,629 lots and ended up net long 7,636 contracts, the CFTC said.

 

In the U.S. Southern Plains, wet weather during the middle to latter part of the week is unfavorable to the developing and maturing hard red winter wheat crop and will increase disease issues, DTN Meteorlogix said.

 

Rainfall in central China this week will help ease stress to filling wheat, the weather firm reported. Wheat prices in China were largely stable in the week to Monday as processing companies are waiting for newly harvested wheat and aren't eager to purchase old supply, traders said.

 

Recent rains also have helped improve the outlook for Australian wheat, although more moisture is still needed through west and northeast areas. The Meteorlogix outlook calls for some chance for showers in the west later in the week, the firm said.

 

Australian Agriculture Minister Peter McGauran on Monday said AWB Ltd. will in the long term be stripped of its powers over wheat exports and a new entity will be formed to operate an export monopoly. This could mean demerging AWB's international unit, which until 2006 managed the export monopoly, from its parent, or establishing a new grower-owned entity to manage the single desk, he said.

 

In the Ukraine, dry and hot weather will increase stress to winter wheat, especially through the central and eastern parts of the country. Highs on Sunday were 86 to 92 degrees Fahrenheit, and temperatures will likely be in the upper 80s and low 90s through at least Friday, Meteorlogix said.