June 28, 2007

 

US Wheat Outlook on Thursday: Up 2-4 cents on exports; waiting for reports

 

 

Strong export sales and follow-through buying from the overnight trading session are expected to carry U.S. wheat futures 2 to 4 cents higher per bushel at the start of Thursday's day session, analysts said.

 

In e-CBOT overnight electronic trading, Chicago Board of Trade July wheat rose 1 1/2 cents to US$6.07 1/2, while CBOT September wheat ended up 2 1/4 cents at US$6.23 3/4.

 

The U.S. Department of Agriculture said export sales for the week ended June 21 were 622,800 metric tonnes, above trade estimates of 200,000 to 500,000 tonnes and 15% higher than the previous week. The sales are bullish and show there is strong global demand for U.S. wheat even at high prices, a CBOT floor broker said.

 

Major buyers included Taiwan, which bought 247,500 tonnes, Japan, which bought 194,400 tonnes, and Egypt, which bought 161,200 tonnes.

 

The USDA is slated to issue its June acreage and quarterly grain stocks report at 8:30 a.m. EDT Friday. Only modest adjustments are expected for wheat acres, but uncertainty about the estimates should lead to some positioning, an analyst said.

 

Market participants are already looking farther ahead to the USDA's July 12 production report, a CBOT floor broker said. Traders are hesitant to hold short positions until they get a better handle on production, he said.

 

Some profit-taking, however, could weigh on prices going into the end of the month, an analyst said. Funds, in particular, may want to take some more money off the table, he said.

 

Otherwise, there is not too much fresh news out, traders said. Hard red winter wheat fields in the U.S. Southern Plains continue to suffer harvest delays because of a rainy weather pattern, forecasters said.

 

In the U.S. Northern Plains, a few thundershowers are forecast for spring wheat areas in North Dakota and northern Minnesota on Sunday and Monday, DTN Meteorlogix said. Dry, hot weather may increase stress to wheat in Montana and possibly South Dakota, but North Dakota crops should continue to do well despite a little heat this period, the weather firm said.

 

The wheat in West Australia will benefit from a series of weak to moderate cold fronts and periodic shower threats during the next five to seven days, which will improve the condition of early wheat, Meteorlogix said.

 

The new Australian wheat crop could exceed the record 26.1 million metric tonnes produced in 2003-04, according to a report from Westpac Banking Corp. A drought that slashed wheat production last crop year, which ended March 31, by more than 60% to 9.8 million tonnes appears to be coming to an end and recent rainfall has ensured a much larger crop can be planted this year in near-ideal conditions, a Westpac senior economist said.

 

CBOT wheat bulls still have strong upside technical momentum and are looking for more on the upside in the near term, a technical analyst said. However, CBOT December wheat prices Wednesday scored a fresh contract high and then backed off on mild profit-taking pressure to close nearer the session low and score a mildly bearish "outside day" down on the daily bar chart, he said.

 

"If there is strong follow-through selling pressure on Thursday, then a bearish 'key reversal' down would be confirmed on the daily bar chart," the analyst said. "That would be one very early clue that a market top is in place."

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at Wednesday's contract high of US$6.46. The next downside price objective for the bears is closing prices below psychological support at US$6.00.

 

First resistance is seen at US$6.34 and then at US$6.40. First support lies at Wednesday's low of US$6.21 and then at US$6.10.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing prices above solid resistance at the contract high of US$6.31, the technical analyst said. The bears' next downside objective is closing prices below solid support at US$5.90.

 

First resistance is seen at US$6.22 and then at US$6.31. First supportis seen at Wednesday's low of US$6.09 and then at US$6.05.