July 30, 2007

 

US Wheat Outlook on Monday: Fundamentals, spillover may lend support

 

 

U.S. wheat futures are expected to start Monday's day session steady, with firmer neighboring markets lending support to prices after slight overnight declines, floor traders said.

 

In e-cbot overnight trading, Chicago Board of Trade September wheat finished down 1/2 cent at US$6.52 3/4. CBOT corn and soybeans rose overnight, and advances in those markets should drag wheat a bit higher, a floor analyst said.

 

Wheat also still has a fundamentally bullish storyline amid tight world supplies and production problems, analysts said. U.S. wheat futures climbed last week on strong export business and as European futures rallied on worries that excessive rains were hurting crops in western Europe.

 

Cool, unsettled weather will continue to disrupt and delay the wheat harvest in western Europe, DTN Meteorlogix said.

 

In western Australia, showers and rain look ready to continue for the next 48 hours before conditions dry out, Meteorlogix said. Recent wet weather has been favorable for wheat, according to the weather firm.

 

Some light to moderate rain in Argentina is possible from Wednesday to Friday of this week. More rain is needed for planting, emergence and development of the wheat crop, Meteorlogix said.

 

Hot, dry weather returned over the weekend in spring wheat areas of the U.S. Northern Plains and will continue through Tuesday, according to Meteorlogix. Hot weather in western areas likely damaged filling wheat earlier in the month, but the crop is now too advanced for any further damage, the weather firm said.

 

Wheat bulls still have the solid upside technical advantage, a technical analyst said. There are "no signs of a market top being close at hand," he said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at the contract high of US$6.78. The next downside price objective for the bears is closing prices below strong support at US$6.38 1/2, which would fill on the downside an upside price gap created on the daily bar chart.

 

First resistance is seen at the contract high of US$6.78 and then at US$6.85. First support lies at Friday's low of US$6.61 and then at US$6.57.

 

Non-commercial speculative funds cut CBOT long wheat futures and options positions by 138 lots and shorts by 69 lots as of July 24, the Commodity Futures Trading Commission said in a supplemental report. The funds were net long 1,213 contracts.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above solid resistance at the contract high of US$6.68 1/2. The bears' next downside objective is closing prices below solid support at US$6.26, which would fill on the downside last week's upside price gap on the daily chart.

 

First resistance is seen at Friday's high of US$6.60 1/2 and then at the contract high of US$6.68 1/2. First support is seen at Friday's low of US$6.51 and then at US$6.44 1/2.

 

Speculative funds increased long KCBT wheat futures and options positions by 3,467 lots and shorts by 392 lots, according to another CFTC supplement report. They were net long 38, 373 contracts.

 

At the Minneapolis Grain Exchange, speculative funds decreased longs by 2,268 lots, shorts by 34 lots and were net long 12,631 contracts, the CFTC said.

 

In other news, China's wheat prices were slightly higher in the week to Monday as government buying drove demand ahead of supply of new wheat. New wheat purchase prices in Henan province, a major wheat producing region, were between RMB1,460-RMB1,600 a metric tonne, RMB10/tonne higher than a week ago.

 

Jordan, meanwhile, said it bought 100,000 metric tonnes of Russian wheat, on a cost and freight basis. Jordan bought the wheat in a tender that closed Thursday from RIAS Trading at the price of US$355/tonne, an official said.

 

Egypt's state-owned General Authority for Supply Commodities Monday said it has wheat reserves worth two-and-a-half months of consumption. Egypt has also signed contracts to import wheat that will arrive after that period to satisfy local consumption, GASC said.