July 6, 2007

 

US Wheat Outlook on Friday: Mixed on e-CBOT; export sales support

 

 

U.S. wheat futures are expected to start Friday's day session mixed following mixed activity overnight, but strong weekly export sales data should provide underlying strength, traders said.

 

In e-cbot overnight trading, Chicago Board of Trade September wheat ended unchanged at US$6.04 per bushel.

 

Wheat futures rallied Thursday on export news and could find support from demand again on Friday, traders said. The U.S. Department of Agriculture reported export sales for the week ended June 28 totaled 538,400 metric tonnenes, above trade estimates of 200,000-400,000 tonnenes. Major buyers included Egypt, which took 118,400 tonnenes, Yemen, which bought 48,000 tonnenes, and Mexico, which bought 47,400 tonnenes.

 

"Demand remains strong," a CBOT floor trader said. "It's supportive."

 

In separate export news, Japan bought 100,000 metric tonnenes of wheat, including 60,000 from the U.S., in a routine tender concluded Friday,

 

Wheat bulls have strong upside technical momentum and gained more Thursday, a technical analyst said. However, a big and potentially bearish "key reversal" down formed on the daily bar chart after sharp declines last Friday and on Monday. A weekly high close on Friday would alleviate those bearish worries, the analyst said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at US$6.35, he said. The next downside price objective for the bears is closing prices below psychological support at US$6.00, which would also almost fill on the downside Thursday's upside price gap on the daily bar chart.

 

First resistance is seen at Thursday's high of US$6.17 and then at US$6.21. First support lies at Thursday's low of US$6.06 1/2 and then at US$6.00.

 

At the Kansas City Board of Trade, which trades hard red winter wheat, the bulls' next upside price objective is closing KCBT December wheat above solid resistance at US$6.31. The bears' next downside objective is closing prices below solid support at US$6.00, which would also nearly fill on the downside Thursday's upside price gap on the daily bar chart.

 

First resistance is seen at Thursday's high of US$6.15 and then at US$6.20. First support is seen at Thursday's low of US$6.06 and then at US$6.00.

 

Wetness is expected to cause further delays for the HRW wheat harvest in parts of southeast Kansas, Oklahoma and north Texas, DTN Meteorlogix said. Weather conditions may improve during the next several days, but thundershowers could return to the region next week, the firm said.

 

"There are still bullish fundamentals at work supporting the wheat market, including tightening world supplies and too much rain hampering the U.S. HRW harvest," the technical analyst said.

 

Hot, dry weather in the U.S. Northern Plains during the next few days should not damage developing spring wheat, industry member said. Temperatures are expected to climb into the 90s Fahrenheit in much of the region through Saturday, with Montana seeing highs above 100 degrees, according to forecasts.

 

Only light, scattered showers are expected in the Northern Plains through next week. However, the region is not "critically dry" yet, and there should be enough subsoil moisture to protect wheat from damage, said Drew Lerner, president of World Weather Inc.

 

"The subsoil moisture is there," said Rick Vallery, executive director of South Dakota Wheat Inc., a producers' group. "There's not going to be a problem with any of that."

 

In other news, Ukraine harvested 4.4 million metric tonnenes of grain to July 5 on about 2.7 million hectares, which is 23% of the planned total area, with the average yield of 1.76 tonnes a hectare, the Agriculture Ministry reported Friday. Hot weather and drought have resulted in reduced yields but speeded up the development of crops.

 

To avoid grain shortages on the domestic market, the Ukrainian government has imposed a virtual ban on the export of grain until the state reserve acquires sufficient amounts of grain from framers, planned at about 3.5 million tonnes. Ukraine plans to export up to 5 million metric tonnes of grain in the 2007-08 marketing year, compared with about 10.5 million tonnes in the 2006-07 marketing year, according to the government press service.