June 7, 2007

 

US Wheat Outlook on Thursday: Down 4-6 cents on e-CBOT, lack of bullish news

 

 

U.S. wheat futures are expected to start Thursday's day session lower on follow-through selling from the overnight and with a lack of fresh, bullish news to strengthen prices, floor traders said.

 

Benchmark Chicago Board of Trade July wheat is called to open down 4 to 6 cents per bushel. In e-cbot trading, July wheat dropped 5 cents to US$5.14 3/4.

 

CBOT July wheat prices Wednesday closed nearer the session low amid profit-taking pressure after hitting a fresh contract high Tuesday. Bulls still have some upside technical momentum, but more of a corrective pullback soon would not be surprising, a technical analyst said.

 

Concerns about tight global ending stocks and potential production problems remain friendly to prices, although news about drought in Ukraine and southern Russia seems to have "kind of run its course," a CBOT floor broker said.

 

There is nothing fresh out about the situation, he added. The region from eastern Ukraine and south Russia to the Black Soils region and the Volga valley looks to be mainly dry but not very hot during the next five days, according to DTN Meteorlogix.

 

There is some chance for a few thundershowers in Ukraine during next Tuesday and Wednesday but not enough to break the recent drying trend, Meteorlogix said. Crop stress continues to build due to the dryness, the weather firm reported.

 

Weakness early in the day session may be tempered by news that India is seeking to import 5 million tonnes of wheat from August to December, a CBOT floor trader said. India's agriculture minister said talks are on with the U.S. over quality norms to import wheat and that India wants the U.S. to bid.

 

The news is supportive, the CBOT floor trader said: "We'll see if the market wants to bite on it right off."

 

Separately, India's government-run trading company MMTC Ltd. on Thursday issued a tender to import 50,000 tonnes of wheat for delivery in July or August and retained the option to buy an additional 50,000 tonnes. Bids should be submitted by June 19 and should be valid till June 29, according to a tender document.

 

Japan, meanwhile, bought 80,000 tonnes of wheat, including 40,000 tonnes of U.S. wheat, in a routine tender concluded Thursday for delivery from July 26 to Aug. 25.

 

There won't be much support from weekly export sales of new crop U.S. wheat, traders said. Sales for the week ended May 31 totaled 347,700 metric tonnes, according to the USDA, which was within trade estimates of 100,000 to 450,000 tonnes. The 2007-08 marketing year began June 1.

 

Concerns about dryness in Australia also seem to be easing, an analyst said. Meteorlogix reported rainfall through southeast Queensland and northern New South Wales will help recharge soil moisture for Australian wheat growth.

 

The Queensland Farmers' Federation's chief executive said two days of steady soaking rains in the region had renewed hope for farmers. In South Australia, meanwhile, farmers have planted the largest area on record to winter crops of mostly wheat, a crop consultant to the state's Department to Primary Industries said Thursday.

 

In central China, hot or very hot temperatures and mostly dry weather will deplete soil moisture for spring planted crops and increase stress to early developing crops, Meteorlogix said.

 

Argentina's southern wheat areas will stay mainly dry or see only a few light showers during the next five days, reducing soil moisture for early developing wheat, the weather firm said. Some of the region was quite dry during May.

 

In the U.S. Southern Plains, hotter, windy weather will help to dry fields and improve crop condition somewhat, Meteorlogix said. However, there may be more thundershowers during the weekend or early next week, especially from Kansas northward, the firm noted.

 

Bulls' next upside price objective is to close CBOT July wheat above solid resistance at the contract high of US$5.36. 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 Wednesday's high of US$5.30 1/2. First support lies at Wednesday's low of US$5.15 1/2 and then at US$5.10.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing July wheat above solid chart resistance at this week's high of US$5.21, the technical analyst said. The bears' next downside objective is closing prices below solid support at US$4.90.

 

First resistance is seen at US$5.10 and then at Wednesday's high of US$5.13 1/2. First support is seen at Wednesday's low of US$5.01 1/2 and then at US$5.00.