June 4, 2007

 

US Wheat Outlook on Monday: Mixed with firm undertone from Egypt

 

 

U.S. wheat futures are expected to start Monday's day session mixed after mixed activity overnight but with a firm undertone from production concerns and a sale to Egypt, floor traders said.

 

In e-cbot trading, Chicago Board of Trade July wheat rose 1 1/4 cents to US$5.22 per bushel, while CBOT September wheat fell 1 cent to US$5.34 1/2. CBOT December wheat slipped 2 1/2 cents to US$5.44 1/2.

 

Egypt's state-owned General Authority for Supply Commodities, or GASC, said over the weekend that it bought 240,000 metric tonnes of U.S. soft red wheat and Russian and/or Kazakhstan wheat, in a tender. Of the total, GASC bought 180,000 tonnes of U.S. soft red wheat and 60,000 tonnes of Russian and/or Kazakhstan wheat for delivery July 10 to Aug. 20.

 

The sale is a "big deal" and friendly for prices, a CBOT floor broker said. The U.S. Department of Agriculture is slated to release its weekly export inspections report Monday at 11 a.m. EDT.

 

There could be some profit-taking after prices hit fresh contract highs Friday, a CBOT floor trader said, although underlying support remains from concerns about drought in Ukraine and southern Russia. Tight global stocks also are positive for prices, traders added.

 

Recent rainfall has helped to stabilize conditions for crops through the western and central Ukraine, but the east has seen only isolated activity, DTN Meteorlogix said. The very dry areas of the east Ukraine and south Russia will continue dry but not hot this week, according to the weather firm.

 

Bulls have solid upside technical momentum in CBOT July wheat after the contract set a fresh contract high Friday, a technical analyst said. Their next upside price objective is to close prices above solid resistance at Friday's contract high of US$5.30 1/2. The next downside price objective for the bears is closing prices below solid support at US$5.00.

 

First resistance is seen at US$5.25 and then at US$5.30 1/2. First support lies at Friday's low of US$5.16 and then at US$5.08.

 

Non-commercial speculative funds trimmed short CBOT wheat futures are options positions by 3,628 lots and lifted longs by 2,476 lots in the week ended May 29, the Commodity Futures Trading Commission said in a supplemental report. The funds were net short 15,788 contracts.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing prices above solid chart resistance at Friday's high of US$5.20. The bears' next downside objective is closing prices below solid support at US$4.90, the technical analyst said.

 

First resistance is seen at US$5.12 and then at US$5.18. First support is seen at Friday's low of US$5.04 and then at US$5.00.

 

Speculative funds cut short KCBT wheat futures and options positions by 981 lots, longs by 739 lots and were net long 7,266 contracts, according to another CFTC supplemental report

 

Drier, hotter weather is needed in the U.S. Southern Plains to help improve the condition of hard red winter wheat, which has received heavy rains recently in some areas, Meteorlogix said.

 

Recent rainfall in central China has helped to recharge soil moisture for early summer crop development, the weather firm said. The Meteorlogix forecast includes little mention of rain during the next seven days with above to much above normal temperatures.

 

Wheat prices in China were largely stable in the week to Monday, with demand for old wheat steady while processing companies were waiting for newly harvested wheat. Prices of average-quality wheat in Henan province were at RMB1,500-RMB1,520 a metric tonne compared with RMB1,480-RMB1,500 a week ago. China started its wheat harvest late last month.

 

In Australia, scattered light showers through northeast wheat areas will help to replenish soil moisture but more will still be needed, according to Meteorlogix.

 

In other news, dry and windy conditions in some areas, combined with repeated frosts, slowed Argentina's 2007-08 wheat planting this week, the Buenos Aires Cereals Exchange said. However, soil moisture conditions were good in the southern region of Buenos Aires province due to showers this week, the exchange said.