July 28, 2006

US Wheat Outlook on Friday: 1-2 cents higher, following overnight trend

U.S. Wheat futures are expected to begin pit trading 1-2 cents higher Friday, following the overnight trend with a lack of fresh fundamental news seen capping the upside, sources said.

In overnight trading at the Chicago Board of Trade, September wheat rose 1 1/2 cents to US$3.89 1/4 per bushel, KCBT Sep hard red wheat fell 1/2 cent to US$4.85, and at the Minneapolis Grain Exchange, September wheat slipped 3/4 cent to US$4.77 1/4.

Recent export sales strength could provide some support and world wheat values are firm and could also underpin the market, said Terry Reilly, an analyst with Citigroup Global Markets Inc. The recent lack of other fundamental news could see wheat in a two-sided trade, he added.

The market could draw some strength from position squaring on ideas the market has been overdone on the downside and due for a correction, a floor analyst said. Wheat is trading near the low end of its recent trading range and is due for a bounce. Any strength in corn and soybeans could also lend support, he added.

CBOT December wheat has declined 19 cents from its close last Friday.

On Thursday, the final day of the U.S. spring wheat tour, participants estimated hard red spring wheat yields at 31.7 bushels per acre, down from the 2005 estimate of 35.5 bushels as high temperatures and a lack of rain helped lower yields, tour participants said.

On technical charts, the next downside objective for the bears in CBOT December is closing prices below support at this week's low of US$4.03 1/2 per bushel, a technical analyst said. It will take a close back above solid resistance at US$4.25 to provide bulls with fresh upside technical momentum, he added. First resistance is pegged at US$4.10 1/2 and then at US$4.13. First support is seen at US$4.03 1/2 and then at US$4.00.

In December KCBT wheat the next upside price objective is closing prices back above resistance at US$5.20. First resistance is seen at Thursday's high of US$5.02 and then at US$5.05. First support is seen at US$4.94 and then at US$4.91.

Cash wheat basis bids were mixed Friday morning. Hard red wheat basis bids were unchanged to higher with Hutchinson, Kansas up 1 cent at 8 cents under September.

Spring wheat bids were mixed with Minot, N.D. up 1 cent at 63 cents under September.

Soft red winter wheat bids were unchanged to higher with Cincinnati, Ohio unchanged at 74 cents under the September.

In other wheat news, India's state-owned trading house MMTC, purchased 50,000 metric tonnes of wheat from the Indian government's wholly-owned subsidiary MTPL, a senior government official said Friday. The wheat is expected to be of Black Sea origin, the government official said.