May 25, 2006

 

US Wheat Outlook on Thursday: Down 2-3 cents on profit-taking, early harvest

 

 

U.S. wheat futures were called to open down 2-3 cents on continued profit-taking ahead of the three-day Memorial Day weekend and early U.S. winter wheat harvest pressure, brokers said.

 

Kansas City Board of Trade hard red winter wheat futures set a near 10-year top on continuous charts Tuesday, while Chicago and Minneapolis wheat futures also set new contract and multi-year highs amid record open interest. Profit-taking has ensued since, with traders eyeing the upcoming holiday weekend.

 

Both the U.S. hard red and soft red winter wheat harvests have begun. In top wheat producer Kansas, harvest reports from Kansas Wheat Kansas Association of Wheat Growers and the Kansas Wheat Commission may be issued beginning sometime the latter part of next week, depending on the level of harvest activity, the groups said Thursday.

 

Weekly U.S. wheat export sales of 254,800 tonnes met trader estimates, brokers noted.

 

Firm gold and crude oil futures and forecasts for lingering above-normal temperatures in the U.S. hard red winter wheat belt could limit losses, they added.

 

In the overnight e-CBOT session, most-active July wheat closed down 5 1/2 cents at US$4.06 1/4 per bushel.

 

"The market has also become tired at higher levels and more downside pressure in the near term would not be surprising," a technical source said. "All of the bullish fundamental news appears to have been factored into the wheat market. But bulls still have the solid technical advantage. The next upside price objective for the bulls is closing prices above solid longer-term resistance at the 2002 high of US$4.34 a bushel, basis nearby futures. It would take a close below solid support at US$4.00 to provide the bears with some fresh downside technical momentum.

 

First resistance for CBOT July was seen at US$4.19 1/2 - Wednesday's high - and then at US$4.25. First support was put at US$4.08 1/4 - Wednesday's low - and then at US$4.04.

 

Kansas City Board of Trade July wheat ended overnight down 4 cents at US$4.97 1/2 per bushel.

 

"Profit-taking pressure was featured," a technical source said. "Bulls still have the solid technical advantage, but a market top may be close at hand. Look for higher volatility in the near term. The next major upside price objective for the bulls is closing prices above longer-term resistance at US$5.50 a bushel, basis nearby futures. A close below support at US$4.70 would provide the bears with some fresh downside technical momentum."

 

First resistance for KCBT July wheat was seen at US$5.08 - Wednesday's high - and then at US$5.10. First support was seen at US$4.98 - Wednesday's low - and then at US$4.91.

 

Cash U.S. hard red winter wheat basis bids were steady to weak Thursday; soft red winter wheat basis bids were mixed, with a 15-cent loss in Chicago and a 13-cent gain in St. Louis; and spring wheat basis bids were also mixed, with a 5-cent gain in the Minneapolis rail bid, grain merchandisers said.

 

In overnight U.S. wheat export news, Japan bought 65,000 tonnes of U.S. wheat in an overall tender of 151,000 tonnes.