July 19, 2007

 

US Wheat Outlook on Thursday: 4-8 cents up on demand, tight global supplies

 

 

U.S. wheat futures are poised to start Thursday's day session firmer on strong export demand and continued bullishness about dwindling world supplies, traders said.

 

Wheat futures are called to open 4-8 cents higher per bushel. In e-cbot overnight trading, Chicago Board of Trade September wheat shot up 8 1/4 cents to US$6.31 3/4, and CBOT December wheat rose 4 cents to US$6.46 1/2.

 

The wheat market is focused on the global supply situation right now amid tight ending stocks and production threats in key producing areas, a CBOT floor trader said.

 

Strategie Grains lowered its 2007-08 E.U. soft wheat crop forecast by 2.9 million metric tonnes from last month's projection to 118.9 million tonnes. French, German and U.K. wheat crops continue to struggle with overly wet conditions and disease problems, while Romania and Bulgaria have been hit by drought.

 

The production cut was larger than some industry members expected and helped push European wheat futures to record highs early Thursday. Gains in the European futures should add to the positive tone for CBOT futures, traders said.

 

CBOT wheat futures rallied Wednesday on talk of a Moroccan tender, and Morocco on Thursday confirmed it bought 243,000 tonnes of U.S. soft wheat. The U.S. Department of Agriculture announced private export sales of 55,000 metric tonnes of U.S. hard red winter wheat and 60,000 tonnes of U.S. soft red winter wheat for delivery to Egypt in the 2007-08 marketing year.

 

The USDA also announced private export sales of 106,000 metric tonnes of U.S. HRW wheat for delivery to Bangladesh in the 2007-08 marketing year. The wheat marketing year began June 1.

 

Japan said it bought 70,000 metric tonnes of U.S. wheat in a routine tender concluded Thursday for shipment Aug. 26-Sep. 25. Earlier this week, Egypt bought 300,000 tonnes of U.S. wheat and 25,000 tonnes of Russian wheat.

 

The USDA said 2007-08 weekly export sales for the week ended July 12 totaled 767,700 tonnes, within trade estimates. Top buyers included Mexico, which took 161,300 tonnes, and Nigeria, which took 144,000 tonnes.

 

Iraq bought 450,000 tonnes of wheat flour from a tender also issued last month. An official would not confirm the wheat's origin, but traders said it came from Turkish companies.

 

Heat and dryness will spread eastward in the Northern Plains, although there is enough top and sub-soil moisture to allow crops to do well, according to DTN Meteorlogix. The western belt continues to trend drier and much hotter, increasing stress to wheat, the weather firm said.

 

There are also some concerns about dryness in Argentina. No significant rainfall is on tap for the driest areas of La Pampa and western Buenos Aires during the next five to seven days, Meteorlogix said. At least two cold periods are expected between the weekend and the end of next week, which could damage emerged wheat, the firm said.

 

In other news, India's federal government Thursday confirmed an upward revision of wheat output estimates for 2007 to 74.89 million metric tonnes from an earlier projection of 73.70 million tonnes. Actual wheat output in 2006 was 69.35 million tonnes.

 

A rare and potentially bearish diamond pattern has formed on the daily bar chart for CBOT December wheat, but strong follow-through buying Thursday and a fresh contract high would negate that pattern, a technical analyst said. Wheat bulls right now still have the upside technical advantage, he said.

 

Bulls' next upside price objective is to close CBOT December wheat above resistance at the contract high of US$6.58, the technical analyst said. The next downside price objective for the bears is closing prices below strong support at US$6.10. First resistance is seen at today's high of US$6.45 and then at US$6.50. First support lies at US$6.35 and then at US$6.30.

 

At the Kansas City Board of Trade, a bearish head-and-shoulders top reversal pattern has formed on the daily bar chart for December wheat, but strong follow-through buying on Thursday would also negate that pattern, the analyst said. 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. First resistance is seen at Wednesday's high of US$6.23 and then at US$6.31. First support is seen at US$6.15 and then at US$6.10.