July 26, 2007

US Wheat Outlook on Thursday: Up, following e-CBOT, strong export sales

U.S. wheat futures are seen opening solidly higher Thursday, following good gains overnight in e-CBOT trading and rock-solid weekly USDA export sales data.

In overnight e-CBOT trading, December Chicago wheat futures last traded up 7 1/2 cents at US$6.60 a bushel.

Weekly USDA export sales data for wheat Thursday morning showed strong sales of 2.08 million metric tonnes, which was well above trade expectations of around 1 million metric tonnes. The strong recent export demand for U.S. wheat, despite the second-highest futures prices on record, underscores the extremely bullish world supply and demand balance sheet, said an analyst.

"End-users continue to extend coverage on concerns that supplies and quality could be tight throughout 2007-2008," said a brokerage analyst.

Weather forecasts for more hot and dry weather in the northern U.S. Plains states and into spring wheat areas of Canada continue to be an underlying supportive factor, said the brokerage analyst.

The second day of the 2007 Hard Spring and Durum Wheat Tour revealed above-average yields and minor damage from a recent heat wave, crop scouts said Wednesday. The average hard red spring wheat yield for day two of the annual tour was 35.7 bushels per acre, up from 29.5 bushels calculated on the second day of the tour last year.

Technically, December Chicago wheat bulls still have the solid upside technical advantage, amid no signs of a market top being close at hand, said a market technician. The bulls' next upside price objective is to close prices above resistance at the contract high of US$6.64 a bushel. The next downside price objective for the bears is closing prices below strong support at US$6.38 1/2 a bushel, which would fill on the downside the upside price gap created on the daily bar chart this week. First resistance is seen at Wednesday's high of US$6.57 1/2 and then at US$6.64. First support lies at Wednesday's low of US$6.48 and then at US$6.38 1/2.

December K.C. HRW wheat bulls also still have the strong technical advantage amid no signs of a market top, said the market technician. The bulls' next upside price objective is closing prices above solid resistance at the contract high of US$6.49 a bushel.

The bears' next downside objective is closing prices below solid support at US$6.26 a bushel, which would fill on the downside this week's upside price gap on the daily chart. First resistance is seen at Thursday's high of US$6.44 1/2 and then at the contract high of US$6.49. First support is seen at US$6.36 and then at US$6.30.