August 3, 2007

 

US Wheat Outlook on Friday: 4-6 cents up on EU support, Canada crop loss

 

 

U.S. wheat futures are called to start Friday's day session firmers as European harvest woes and lowered projections for Canada's crop reinforce concerns about tight global supplies, analysts said.

 

Wheat futures are called to open 4-6 cents higher per bushel. In e-cbot overnight trading, Chicago Board of Trade September wheat settled up 6 1/4 cents at US$6.48, and CBOT December wheat closed 3 1/2 cents higher at US$6.67.

 

Prices should feel a boost from strength in London- and Paris-based wheat futures, which opened in positive territory, a CBOT floor trader said. U.S. wheat futures have been finding direction from the European markets recently, he added.

 

Word that some French harvest results are confirming reduced wheat yields is supportive to prices, traders said. Rains going into harvest were unfavorable for the crop.

 

The Canadian Wheat Board, meanwhile, cut its production forecast for wheat after several weeks of record-breaking heat in western Canada. A CWB official said intense heat in Alberta and Saskatchewan, in particular, reduced durum production estimates about 10% and spring wheat estimates by about 4%.

 

Further crop damage from heat and dryness is possible in Canada's southwest Prairies during the next seven days, according to DTN Meteorlogix. Canadian wheat production was already expected to be down in 2007 from last year due to reduced plantings, traders noted.

 

"Heat in Canadian spring wheat areas is a small bullish feature, along with the continued lack of export availability out of Europe," according to a market comment from Brugler Marketing & Management.

 

There are also some worries about dryness in southwestern Australia. Serious-to-severe rainfall deficiencies emerged in parts of the region's wheat lands in the three months ended July 31, but there were no deficiencies in wheat lands elsewhere, the Australian government's Bureau of Meteorology reported.

 

Brazil's top wheat producer, Parana state, could lose up to 17% of its 2007 crop due to dry weather, according to a report by a local newswire. Parana could produce 1.7 million metric tonnes of wheat instead of the 2.06 million tonnes the state government had forecast, the report stated.

 

In other news, Pakistan has no plans to resume exports of wheat despite a domestic surplus, the commerce secretary said.

 

U.S. wheat prices have advanced recently on strong export demand amid the global production problems and tight supplies. Those factors remain fundamentally supportive, an analyst said.

 

A "rock-solid" weekly U.S. Department of Agriculture wheat export sales figure released Thursday pushed wheat higher Thursday as end-users kept "stocking up amid worries about obtaining supplies," a technical analyst said. Wheat bulls have the solid upside technical advantage, and there are no signs of a market top being close at hand, he said.

 

Another analyst, however, said he was disappointed most-active CBOT September wheat only ended up 5 3/4 cents Thursday following the strong export sales. The market looked as though it was getting a little "toppy," 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 technical analyst said. 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 Thursday's high of US$6.69 1/2 and then at US$6.78. First support lies at Thursday's low of US$6.60 1/2 and then at US$6.51 1/2.

 

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 technical analyst said. The bears' next downside objective is closing prices below solid support at US$6.26, which would fill on the downside an upside price gap on the daily chart.

 

First resistance is seen at Thursday's high of US$6.58 and then at US$6.68 1/2. First support is seen at Thursday's low of US$6.49 and then at US$6.45.