June 1, 2007

 

US Wheat Outlook on Friday: Pressure seen from e-CBOT, profit-taking

 

 

U.S. wheat futures are expected to start Friday's day session mostly lower following overnight weakness at the Chicago Board of Trade and a lack of fresh news to direct prices, floor traders said.

 

Benchmark Chicago Board of Trade July wheat is called to open 1 to 2 cents lower per bushel. In e-cbot trading, CBOT July wheat slipped 1 cent to US$5.16.

 

CBOT wheat will continue to look for news about the condition of crops in Ukraine and Russia, which are suffering from abnormally hot and dry conditions, a floor trader said. Fears about crop loss due to drought remain supportive, although there has not been much fresh news concerning the situation, he added.

 

The lack of new developments may spark some profit-taking going into the weekend after strong rallies earlier this week, the trader said.

 

A few more thundershowers developed Thursday through central and western Ukraine, although it was dry in eastern Ukraine, the North Caucasus and Black Soils region of Russia, according to DTN Meteorlogix. Highs reached the 90s Fahrenheit in the eastern areas Thursday.

 

The very dry areas of the east Ukraine and south Russia are expected to turn cooler during the coming days with a few thundershowers on the cold front, Meteorlogix said.

 

"The rainfall should not be enough to ease concerns in the area but the cooler weather may last awhile," according to the weather firm.

 

CBOT July wheat prices Thursday closed near mid-range and did close at the monthly high close, which is a bullish technical signal, a technical analyst said. Prices this week have also seen a bullish upside "breakout" from a big bull flag pattern on the daily bar chart, he said.

 

The bulls' next upside price objective is to close prices above solid resistance at the April contract high of US$5.30, the technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$4.90.

 

First resistance is seen at Thursday's high of US$5.24 and then at the contract high of US$5.30. First support lies at Thursday's low of US$5.08 1/2 and then at US$5.00.

 

Bulls also have solid upside technical momentum at the Kansas City Board of Trade, the technical analyst said. Their next upside price objective is closing 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$4.85.

 

First resistance is seen at Thursday's high of US$5.12 and then at US$5.18. First support is seen at Thursday's low of US$4.99 and then at US$4.95.

 

KCBT July wheat ended the overnight session 1 1/2 cents higher at US$5.05 1/2, which may gave the market some early support, a KCBT floor broker said. The modest gains reflect ongoing concerns about excessive moisture that has delayed harvest in U.S. hard red winter wheat regions, an analyst said.

 

Drier, hotter weather is needed to help improve the condition of HRW wheat in the U.S. Southern Plains, according to Meteorlogix.

 

In central China, meanwhile, recent rainfall has helped to recharge soil moisture for early summer crop development, the weather firm said. The forecast includes little mention of rain during the next seven to 10 days, although mostly above normal temperatures are expected.

 

Any shower activity in Australia during the next five to seven days will be light, which is favorable for planting, Meteorlogix said. More rain is needed in the west and northeast.

 

In other news, the U.S. Department of Agriculture said weekly wheat export sales totaled 709,900 metric tonnes, above trade estimates of 100,000 to 500,000 tonnes. There was a net sales reduction of 248,900 tonnes in old-crop sales, although new-crop sales were seen by at CBOT floor trader as "strong" at 958,800 tonnes.

 

Of 2007-08 sales, Japan bought 169,400 tonnes; Iraq bought 100,000 tonnes; Taiwan bought 83,500 tonnes; and unknown destinations took 90,000 tonnes, according to the USDA.

 

Elsewhere, Kazakhstan so far has planted spring wheat on 11.45 million hectares out of a total of 12 million expected to be seeded, the agriculture ministry said.