July 17, 2007

 

US Wheat Outlook on Tuesday: 6-7 cents higher on Egypt tender, e-CBOT rise

 

 

U.S. wheat futures are expected to start Tuesday's day session 6-7 cents higher per bushel on firmer overnight trade and hopes of attracting Egyptian business, analysts said.

 

In e-cbot trading, Chicago Board of Trade September wheat rose 7 cents to US$6.08 3/4, and CBOT December wheat finished 6 cents higher at US$6.24.

 

Egypt's state-owned General Authority for Supply Commodities is tendering to buy at least 55,000-60,000 metric tonnes of wheat for shipment Aug. 16-31, on a free-on-board basis, an official said. GASC is looking to purchase 55,000 to 60,000 tonnes of U.S. hard red winter wheat, U.S. soft red wheat, U.S. soft white wheat, French milling wheat, Argentine wheat or Canadian soft wheat, he said.

 

The tender came after the close of Monday's day session, in which wheat futures fell sharply under pressure from limit-down moves in CBOT corn and soybeans. Egypt's quick response to the price break demonstrates that end user demand remains strong, Farm Futures analyst Arlan Suderman said.

 

"End users are still very concerned about this year's stocks, as well as those for 2008," Suderman wrote in a market comment.

 

There are ideas wheat futures are due for a bit of a bounce after Monday's heavy losses, an analyst added.

 

There are also some concerns that a heat wave will damage developing U.S. spring wheat, although crop condition ratings are still high, a CBOT floor analyst said. A hot and mostly dry pattern is expected to increase stress to crops on the northern Plains for at least the next six to 10 days, according to a forecast from DTN Meteorlogix.

 

The U.S. Department of Agriculture cut spring wheat condition ratings by two percentage points in its weekly crop progress report, pegging 76% of the crop in good-to-excellent condition as of Sunday. The agency said 93% of the crop was headed, compared to 95% at the same time last year and the five-year average of 86%.

 

"Extreme heat is expected to build over the entire spring wheat belt by the end of the week, just as the crop moves into the grain fill stage of development," Suderman said.

 

The USDA said winter wheat harvest was 70% complete, down from 78% last year and the five-year average of 73%. Harvesting has been delayed in many hard red winter wheat states this year because of excessive rain that kept producers out of the fields. Less thunderstorm activity is forecast for the Southern Plains this week, Meteorlogix said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at US$6.30 1/2 a bushel, which would fill on the upside Monday's downside price gap on the daily chart. The next downside price objective for the bears is closing prices below psychological support at US$6.00.

 

First resistance is seen at US$6.26 and then at Monday's high of US$6.29. First support lies at Monday's low of US$6.16 and then at US$6.10.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above solid resistance at US$6.31. The bears' next downside objective is closing prices below solid support at US$6.00.

 

First resistance is seen at Monday's high of US$6.17 and then at US$6.21 1/2, which is the top of Monday's downside price gap on the daily bar chart. First support is seen at Monday's low of US$6.05 and then at US$6.00.

 

In other news, Japan said it was seeking 70,000 metric tonnes of wheat in a routine tender to be concluded Thursday. The entire shipment is expected to arrive Aug. 26 to Sept. 25.

 

China's summer wheat output will total 103 million tonnes, up 1.67 million tonnes, or 1.6%, on year, according to the Ministry of Agriculture.