July 11, 2007

 

US Wheat Outlook on Wednesday: 2-4 cents higher on pre-report positioning

 

 

Short-covering ahead of the release of an anticipated government crop report is expected to push U.S. wheat futures higher at the start of Wednesday's day session, analysts said.

 

Wheat futures are called to open 2-4 cents higher per bushel. In e-cbot trading, Chicago Board of Trade September wheat rose 2 1/2 cents to US$6.04 1/4, while CBOT December wheat finished 2 1/2 cents higher at US$6.18 1/4.

 

There is little fresh news out for the wheat markets, but follow-through buying from the overnight and positioning ahead of the U.S. Department of Agriculture's July supply/demand report should be supportive in early trading, an analyst said. The report, due out at 8:30 a.m. EDT (1230 GMT) Thursday, is slated to include updated estimates for U.S. wheat production and 2007-08 carryout.

 

Analysts expect the USDA to lower its estimate for 2007-08 all winter wheat production from its June estimate of 1.610 billion bushels due to damaging rains that plagued the Southern Plains. The average analyst estimate for spring wheat production is 495 million bushels, down from 509 million in 2006.

 

The average analyst estimate for 2007-08 wheat carryout is 464 million bushels. The USDA in June put 2006-07 carryout at 456 million and 2007-08 carryout at 443 million.

 

"Thursday's USDA supply and demand report is expected to be bullish the wheat market," a technical analyst said.

 

Western and southern areas of the Southern Plains will see more thunderstorms during the next few days, likely delaying HRW wheat harvest further, DTN Meteorlogix said in a forecast. In spring wheat growing areas of the Northern Plains, hotter, drier conditions are expected to return this weekend and continue early next week, the weather firm said.

 

The U.S. has seen solid demand for wheat exports recently and there continues to be bullish talk in the markets about more sales to Brazil, a Kansas City Board of Trade floor trader said. Brazil's wheat industry on Tuesday asked the government to temporarily suspend a 10% import tax on U.S. and Canadian wheat, according to the national wheat milling association.

 

"Demand remains solid at these prices, but we'll probably need to see fresh bullish news tomorrow in the domestic and/or global production estimates to move prices to new highs near-term," Farm Futures analyst Arlan Suderman said Wednesday in a market comment. "Longer-term, wheat has to worry about losing acres to corn and soybeans at a time when global stocks are the tightest of modern history. As such, wheat should remain well supported, barring a bearish surprise Thursday."

 

Bulls' next upside price objective is to close CBOT December wheat above resistance at US$6.35, the technical analyst 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 an upside price gap on the daily bar chart.

 

First resistance is seen at Tuesday's high of US$6.23 and then at this week's high of US$6.26 1/2. First support lies at this week's low of US$6.11 and then at US$6.06 1/2.

 

At the KCBT, bulls' next upside price objective is closing December wheat above solid resistance at US$6.31, the analyst said. The bears' next downside objective is closing prices below solid support at US$6.00, which would also nearly fill on the downside an upside price gap on the daily bar chart.

 

First resistance is seen at US$6.10 and then at this week's high of US$6.15. First support is seen at Tuesday's low of US$6.03 1/2 and then at US$6.00.