May 21, 2008

 

US Wheat Outlook on Wednesday: 5-7 cents higher on demand, outside markets

 

 

U.S. wheat futures are seen rising at the start of Wednesday's day session on a spurt of fresh demand news and spillover strength from firm outside markets, traders said.

 

Benchmark Chicago Board of Trade July wheat is called to open 5 to 7 cents per bushel higher. In overnight electronic trading, CBOT July wheat was up 6 cents at US$7.90.

 

Surging energy prices are expected to give grains a boost, as front-month Nymex light, sweet crude futures breached US$130 a barrel for the first time, traders said. Weakness in the U.S. dollar also is seen lending support, they said.

 

As for demand, Pakistan and Bangladesh each floated new tenders to import a combined 175,000 metric tonnes of wheat. Bangladesh, in its first wheat import tender of the year, is seeking to buy 100,000 tonnes, while Pakistan issued a global tender to import 75,000 tonnes by June.

 

The U.S. may not win much of the business, but it is supportive to see that global demand is still out there, a CBOT trader said.

 

The Grain Board of Iraq, meanwhile, has bought some 600,000 metric tonnes of hard red winter wheat from the U.S., Iraqi traders said. The wheat was bought in a tender announced by the state-run Grain Board of Iraq that closed May 18, they said.

 

Recent market chatter at the CBOT had hinted at the possibility of sales to Iraq, and the business is "solid," a CBOT floor broker said. However, the markets still face "significant headwinds" from forecasts for a record global crop in 2008-09, he said.

 

"The attitude seems to be, 'We've got the wheat to sell,'" the broker said. "Can we rule out a two-sided trade? No."

 

In bearish news, Ukraine's government canceled its wheat export quota, according to a media report. That could mean some extra supply will enter the global market from the Black Sea region, traders said.

 

Weather looks mostly favorable in global growing areas, although there are scattered concerns about dryness in parts of Australia and Argentina, traders said. Showers through La Pampa and southern Buenos Aires in Argentina during the next few days will help replenish soil moisture for planting and early growth of winter wheat, DTN Meteorlogix said.

 

Fall rains will favor pre-winter growth of wheat through West Australia, with more shower activity possible during the next seven days, Meteorlogix said. Recent rainfall has helped replenish soil moisture for planting wheat in South Australia and Victoria, but more rain is needed there and in New South Wales and South Queensland, the private weather firm said.

 

Bulls' next upside price objective is to push and close CBOT July wheat above psychological resistance at US$8.50, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below technical support at last week's low of US$7.49.

 

First resistance is seen at US$8.00 and then at Tuesday's high of US$8.09 1/2. First support lies at this week's low of US$7.71 1/4 and then at US$7.49.