May 31, 2007

 

US Wheat Outlook on Thursday: To start 1-2 cents higher on weather concerns

 

 

U.S. wheat futures are expected to start Thursday's day session firmer, with support coming from follow-through buying and from weather problems threatening global growing regions, traders 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 settled 2 3/4 cents higher at US$5.13 1/2.

 

Concerns about extended dryness in Ukraine and Russia remain supportive to prices, a CBOT floor trader said. Due to an ongoing drought, Ukraine's government said Wednesday it planned to suspend new-crop grain exports until state reserves were formed.

 

A few thundershowers made it into the very dry southeast Ukraine and western North Caucasus Russia on Wednesday but with low coverage, according to DTN Meteorlogix. The weather firm's outlook calls for cooler temperatures and a few more thundershowers during the weekend, but then conditions look to become drier again. Temperatures should cool for awhile after the hot weather breaks, the firm said.

 

The threat to production in Ukraine, a major exporter from the Black Sea region, comes as global stocks are already tight, an analyst noted. The International Grains Council last week said world wheat ending stock projections for 2007-08 are the lowest since 1981.

 

There are also continued worries about wetness in the U.S. Plains, the analyst said. The precipitation is delaying harvest in some areas, including southern Oklahoma, he adds.

 

More scattered rains are on track for the next five days, an "unfavorable" development for maturing to harvesting wheat, Meteorlogix said. Long range charts suggest a chance for drier, warmer weather in the southern belt, according to the firm.

 

Continued fund buying also may come in to boost prices, CBOT floor traders said. Commodity funds were heavy buyers in the grains Wednesday and helped shove prices sharply higher.

 

CBOT wheat bulls gained fresh upside technical momentum Wednesday, and negated a downtrend from the April high, a technical analyst said. The bulls' next upside price objective is to close CBOT July prices above solid resistance at the April contract high of US$5.30. The next downside price objective for the bears is closing prices below solid support at US$4.80.

 

First resistance is seen at Wednesday's high of US$5.12 1/4 and then at the February high of US$5.18. First support lies at US$5.07 1/2 and then at US$5.00.

 

At the Kansas City Board of Trade, a five-week-old downtrend on the daily bar chart was "soundly negated" by gains Wednesday, the technical analyst said. The bulls' next upside price objective is closing KCBT July prices above solid chart resistance at the April high of US$5.18. The bears' next downside objective is closing prices below solid support at US$4.80 a bushel.

 

First resistance is seen at Wednesday's high of US$5.03 and then at US$5.07. First support is seen at US$4.95 and then at US$4.90.

 

In other news, the U.S. Department of Agriculture announced private export sales of 120,000 metric tonnes of U.S. soft red winter wheat for delivery to Spain in the 2007-08 marketing year. The wheat marketing year begins June 1.

 

Japan, meanwhile, bought 25,000 metric tonnes of U.S. wheat in a tender concluded Thursday for delivery sometime in July, said an agriculture ministry official. The tender included 19,000 tonnes of western white wheat and 6,000 tonnes of dark northern spring wheat.

 

The USDA is scheduled to release its weekly export sales report Friday. The report, which typically comes out on Thursdays, was delayed a day because of the Memorial Day holiday.