June 13, 2007

 

US Wheat Outlook on Wednesday: Down 2-4 cents on profit-taking, overdone ideas

  

 

Profit-taking and ideas that recent gains were overdone are expected to push U.S. wheat futures to open 2 to 4 cents lower per bushel Wednesday, floor traders and analysts said.

 

In e-cbot overnight electronic trading, benchmark Chicago Board of Trade July wheat slipped 2 1/2 cents to US$5.62 1/2.

 

Wheat has made strong advances in recent trading sessions, and there are thoughts the markets are due for a pullback, a CBOT floor trader said. Follow-through selling from the overnight and fresh profit-taking are expected, he added.

 

Spillover weakness from CBOT corn and soybeans also should help keep wheat on the defensive, traders said. The neighboring markets stumbled overnight on a forecast for rain in the U.S. eastern corn belt and should be under pressure in early trading, they said.

 

Tight global ending stocks and concerns about crop losses remain underlying supportive features, but it doesn't look as though there is much fresh news out about the world supply situation, an analyst says. The bulls want need to be fed every day, he notes.

 

CBOT July wheat prices on Tuesday hit another fresh contract high and closed near mid-range with support from bullish fundamentals and technicals, a technical analyst said. Wheat bulls still have solid upside technical momentum, he said.

 

The bulls' next upside price objective is to close CBOT July wheat above major psychological resistance at US$6.00, the technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$5.30 1/2, which would fill on the downside Monday's big upside price gap on the daily bar chart.

 

First resistance is seen at US$5.70 and then at Tuesday's contract high of US$5.76. First support lies at Tuesday's low of US$5.54 1/2 and then at US$5.50.

 

At the Kansas City Board of Trade, which trades hard red winter wheat, the bulls' next upside price objective is closing July wheat above psychological resistance at US$6.00, the technical analyst said. Above that, US$6.25 is the next upside price objective. The bears' next downside objective is closing prices below solid support at US$5.33, which is the top of this week's big upside price gap on the daily chart.

 

First resistance is seen at Tuesday's contract high of US$5.71 and then at US$5.75. First support is seen at US$5.50 and then at US$5.40.

 

Harvest and maturation of HRW wheat in the U.S. Southern Plains may be disrupted again by widespread rain and thunderstorms, DTN Meteorlogix said. In the Northern Plains, heavy storms over the Dakotas and Minnesota may lead to local flooding in wheat fields. The weather forecasts are supportive to prices, an analyst said.

 

A few thundershowers, 0.25-1.00 inch, occurred Tuesday in central Ukraine, which has been suffering from a severe drought along with southern Russia, Meteorlogix said. Temperatures were cooler in western areas but warm farther east, the weather firm said.

 

Ukraine will be dry or see only a few light showers from Wednesday through Monday, Meteorlogix said. Long range charts suggest a chance for a few more thundershowers next Tuesday or Wednesday, but dryness continues to stress winter and spring crops.

 

Dryness is also impacting emergence and early growth of wheat through southern locations of Argentina, according to Meteorlogix. Light to moderate rainfall is expected during the next few days.

 

In other news, India may issue a tender through State Trading Corp. to import up to 2 million metric tonnes of wheat by the end of the month, a senior government official said Wednesday. The government, however, has yet to make a final decision on the plan, he cautioned. Market participants have already heard India may make some big purchases and are waiting to see an actual tender, a CBOT floor broker said.

 

French soft wheat ending stocks, meanwhile, are estimated at 2.15 million metric tonnes for 2006-07, up from the previous month's estimate, the managing director of the French state grains board said. ONIGC raised its ending stocks estimate from 2.12 million tonnes last month.