July 20, 2007

 

US Wheat Outlook on Friday: Up 3-5 cents on follow-through from overnight

 

 

U.S. wheat futures are expected to start Friday's day session 3-5 cents higher per bushel on follow-through buying, with underlying support from fears about crop losses in Europe and Canada, traders said.

 

In overnight e-cbot trading, Chicago Board of Trade September wheat closed 4 1/4 cents higher at US$6.24 1/4, while CBOT December wheat ended 3 1/4 cents higher at US$6.38 1/2.

 

Paris milling wheat futures traded on Liffe also rose to another record high early Friday, which should add to the bullish tone for U.S. wheat, traders said. Paris wheat advanced on fears of crop damage from the weather and on speculative buying.

 

Nagging rains late in the season have lowered quality and specific weights in E.U. winter grain crops. However, traders warn that so far the results for the soft wheat crop are only from initial cuttings and that harvest has just started to roll along north of Paris, a key producing region.

 

Strategie Grains on Thursday lowered its 2007-08 European Union soft wheat crop forecast by 2.9 million metric tonnes from last month's projection.

 

There are also concerns about production in Canada, where producers planted less wheat this year than last year, analysts said. Hot, dry weather in southern spring wheat areas poses a threat to the crop, they said.

 

Heat and dryness will spread eastward in the U.S. Northern Plains during the next few days and reduce soil moisture for crops, according to DTN Meteorlogix. However, there is enough top and sub-soil moisture to allow these crops to do well, the weather firm said.

 

In Western Australia, showers mainly occurred through the western part of the region's wheat belt during the past 24 hours, Meteorlogix said. There will be another chance for showers in similar areas during the weekend, according to the firm.

 

No significant rainfall is expected for the driest Argentine wheat areas of La Pampa and western Buenos Aires during the next five to seven days, Meteorlogix said. At least two cold periods are seen between the weekend and the end of next week, the firm added.

 

Argentine wheat prices closed higher Thursday, despite declines at the CBOT, as some exporters needed to buy to cover commitments, according to the Rosario Grain Exchange.

 

U.S. wheat futures may come under pressure from some profit-taking going into the weekend and amid bearish news that Ukraine will resume exporting wheat on Oct. 1, traders said. Ukraine had imposed a virtual ban on grain exports amid crop losses from a severe drought. The agriculture minister said the amount of exports in the fall will depend on the balance of grain in the country.

 

Ukraine's wheat harvest to date was 11.1 million tonnes, harvested on 4.8 million hectares, with the average yield of 2.34 tonnes/hectare, the agriculture ministry said. This year's total wheat harvest is expected at 11.7 million-12.6 million tonnes.

 

Bulls' next upside price objective is to close CBOT December wheat above resistance at the contract high of US$6.58, a technical analyst said. The next downside price objective for the bears is closing prices below strong support at US$6.10 a bushel. First resistance is seen at Thursday's high of US$6.51 1/2 and then at US$6.58. First support lies at Thursday's low of US$6.30 1/2 and then at US$6.25.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing December wheat above solid resistance at Thursday's high of US$6.34, the analyst said. The bears' next downside objective is closing prices below solid support at US$6.00. First resistance is seen at US$6.30 and then at US$6.34. First support is seen at Thursday's low of US$6.15 and then at US$6.10.