July 2, 2007

 

US Wheat Outlook on Monday: 6-10 cents higher on e-CBOT, export sales

 

 

U.S. wheat futures are expected to start Monday's day session 6 to 10 cents higher per bushel following firmer overnight trading and on solid export demand, analysts said.

 

In e-cbot activity, Chicago Board of Trade September wheat rose 8 1/4 cents to US$6.05 1/4.

 

Wheat traded higher overnight in a bit of a rebound from heavy losses in some contracts Friday, traders said. The longer-term outlook for wheat remains bullish amid global production problems and historically-tight stocks, they said.

 

There appears to be solid demand for U.S. wheat, even at high prices, with good buying on breaks, traders said. Egypt's state-owned General Authority for Supply Commodities, or GASC, tendered for wheat shortly after Friday's close.

 

On Saturday, GASC said it bought 205,000 metric tonnes of U.S. and Russian wheat in a tender, on a free on board basis. GASC also bought 100,000 tonnes of Russian and/or Kazakhstan wheat, at the seller's option, in a local tender in Egyptian pounds.

 

There was also a report out over the weekend, citing trade sources, that said Iraq has finalized several deals to buy 300,000 tonnes of U.S. hard wheat but it still negotiating shipment terms.

 

In U.S. growing areas, rain last week caused flooding in parts of Texas, Oklahoma and southeast Kansas, which will extend harvest delays for hard red winter wheat, DTN Meteorlogix said. Excessive wetness in the Southern Plains has slowed cutting for weeks and damaged the crop.

 

Farther north, hot and mostly dry weather is increasing stress to spring wheat crops in western South Dakota. It will not be as hot or as dry elsewhere in the region during this week, favoring wheat growth, Meteorlogix said.

 

Outside the U.S., it was a dry and cool weekend for Ukraine and southern Russia, which are suffering from drought. It should be dry and warmer for the next three to four days, Meteorlogix said. Cooler temperatures and showers return late in the week, the weather firm said.

 

Turkey's wheat crop is expected to be 8%-10% lower this year compared to 2006 due to drought, according to a report. However, the agriculture minister doesn't expect to import wheat.

 

The wheat in West Australia will benefit from shower activity Sunday and Monday, but conditions should turn drier again for an extended period of time, according to Meteorlogix. Dry weather is slowing planting and emergence of wheat in Argentina, especially through the southwest, and there is no significant rainfall expected for at least the next seven days, the firm said.

 

Newly harvested wheat prices in China were slightly higher in the week to Monday, as farmers were reluctant to sell, traders and analysts said Monday. New wheat prices in major producing regions rose RMB50-RMB100 from a week ago to RMB1,400-RMB1,560 a metric tonne.

 

CBOT December wheat prices Friday streaked to a fresh contract high and then reversed course to close lower, scoring a bearish "outside day" down on the daily bar chart on Friday, a technical analyst said. If there is good follow-through selling pressure Monday, then a bearish "key reversal" down would be confirmed on the daily bar chart, which would be one early clue that a market top is in place, he said.

 

"Right now there has been no serious chart damage inflicted in wheat and the wheat bulls still have the strong technical advantage," the analyst said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at the contract high of US$6.58. The next downside price objective for the bears is closing prices below psychological support at US$6.00.

 

First resistance is seen at US$6.20 and then at US$6.25. First support lies at Friday's low of US$6.06 and then at US$6.00.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing prices above solid resistance at the contract high of US$6.49. The bears' next downside objective is closing prices below solid support at US$6.00.

 

First resistance is seen at US$6.31 and then at US$6.40. First support is seen at Friday's low of US$6.08 and then at US$6.00.