July 27, 2007

 

US Wheat Review on Thursday: Strong weekly export sales power rallies

 

 

U.S. wheat futures closed sharply higher and set fresh contract highs Thursday, but well off the session highs amid a steep stock market sell-off.

 

Chicago Board of Trade September wheat futures closed up 17 cents at US$6.51 a bushel. December futures closed up 16 1/2 cents at US$6.69 a bushel.

 

Kansas City Board of Trade September wheat futures closed up 14 3/4 cents at US$6.41 1/2 and December futures closed up 11 1/2 cents at US$6.53 1/2.

 

Minneapolis Grain Exchange September wheat closed up 9 cents at US$6.46 and December closed up 10 cents at US$6.57.

 

Powering the rally were very strong weekly USDA export sales above 2 million metric tonnes in the latest report issued Thursday morning. That's double the amount expected by the trade and the highest weekly USDA export sales total for wheat in 10 years. Wheat bulls got an added boost of export demand news Thursday when USDA also announced a fresh daily sale of U.S. wheat to Algeria.

 

"End-users are scrambling to cover needs in a tightening world supply and demand balance sheet," said an analyst.

 

Adding fuel to the bullish fire in wheat Thursday was news from the International Grains Council. The IGC cut its European Union wheat crop estimate by 2.9 million metric tonnes, to 126.7 million. The IGC cut the global wheat crop by 700,000 metric tonnes, to 614 MMT.

 

Wheat futures prices did back off the highs late, partly due to a big sell-off in the U.S. stock market that sent crude oil and gold prices sharply lower.

 

Scouts on the last leg of the Hard Spring and Durum Wheat Tour found solid yield potential. An average yield of 36.5 bushels an acre was calculated by crop scouts, compared to 31.2 bushels calculated on the same routes taken on last year's tour.

 

However, recent hot and dry weather in the northern U.S. Plains states, and more in the forecast, has led to ideas of yield potential being negatively impacted by the excessive heat an little moisture.

 

 

Chicago Board of Trade

 

Technically, December Chicago SRW wheat prices initially gapped higher on the daily bar chart and scored a fresh contract high, but then did drop down and fill the gap and close near mid-range on the day.

 

Wheat bulls still have the solid upside technical advantage, amid no signs of a market top being close at hand, said a market technician. 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.

 

 

Kansas City Board of Trade

 

Technically, December Kansas City HRW wheat prices gapped higher on the daily bar chart, hit a fresh contract high, but then did back off the high to close nearer the session low.

 

Wheat bulls still have the strong technical advantage amid no signs of a market top. Bulls' next upside price objective is closing prices above solid resistance at Thursday's contract high of US$6.68 1/2 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 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.

 

 

Minneapolis Grain Exchange

 

Technically, December hard red spring wheat futures initially gapped higher on the daily bar chart, but that gap was filled by the close and prices finished near mid-range.

 

Bulls still have the solid upside technical advantage, said the market technician. The next upside price objective for the HRS bulls is to produce a close above solid chart resistance at the contract high of US$6.68.

 

The next downside price objective for the bears is to produce a close below solid support at US$6.38, which would fill on the downside the upside price gap created this week on the daily bar chart.

 

First resistance is seen at US$6.58 1/2 and then at US$6.68. First support is seen at Thursday's low of US$6.50 and then at US$6.43.