July 27, 2007

US Wheat Outlook on Friday: Weak start on profit-taking pressure

U.S. wheat futures are seen opening down 2 to 4 cents a bushel Friday on profit-taking pressure from recent strong gains that pushed all three wheat markets to fresh contract highs on Thursday.

In overnight e-cbot trading, December Chicago wheat futures were down 3 3/4 cents at US$6.65 1/4 cents a bushel.

After strong gains on Thursday, in the wake of rock-solid weekly USDA export sales data for wheat, it's not surprising at all to see some profit-taking pressure heading into the weekend, said an analyst.

After sampling fields in North Dakota, South Dakota and Minnesota, crop scouts on the Wheat Quality Council HRS tour found an average yield of 37.3 bushels per acre, which is up from 31.7 bushels per acre in 2006 and the 5-year average of 35.1 bushels per acre. Unless late-season weather is adverse, crop scouts feel this year's spring wheat crop will be above average.

In overnight demand news for wheat, South Korea bought a total of 42,700 metric tonnes of U.S. wheat in two separate tenders. Taiwan bought 98,770 MT of U.S. wheat.

Warned one brokerage analyst: "If end-users are front-loading this market, prices may have to move lower later in the year to return some of the lost demand back to the market."

Technically, December Chicago SRW 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 Thursday's contract high of US$6.78 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 Thursday's contract high of US$6.78 and then at US$6.85. First support lies at Thursday's low of US$6.57 and then at US$6.48.

December K.C. HRW wheat bulls' next upside price objective is closing prices above solid resistance at Thursday's contract high of US$6.68 1/2 a bushel, said the market technician. 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 US$6.60 and then at the contract high of US$6.68 1/2. First support is seen at Thursday's low of US$6.50 and then at US$6.44 1/2.