August 7, 2007

 

US Wheat Outlook on Tuesday: 4-6 cents higher on follow-through, EU gains

 

 

U.S. wheat futures are expected to start Tuesday's day session 4-6 cents higher per bushel on follow-through buying, a rally in European markets and strong demand, traders said.

 

In e-cbot overnight trading, Chicago Board of Trade September wheat rose 5 1/4 cents to US$6.69 1/4, and CBOT December wheat ended up 5 cents at US$6.88 1/2.

 

CBOT wheat futures climbed to fresh 11-year highs Monday, and there should be some more follow-through buying Tuesday, floor traders said. Spillover support from sharp gains in EU wheat futures also should boost prices, they added.

 

Paris-based milling wheat futures traded on Liffe gapped higher at Tuesday's open on renewed concerns over tight world supplies, with most active November setting a fresh record high. Poor wheat harvest results in the EU and demand from northern Africa contributed to bullish enthusiasm, traders said.

 

Morocco's state wheat buyer confirmed it was tendering to buy 350,000 metric tonnes of EU soft milling wheat, plus or minus 10%. Wheat industry members said Morocco also had tendered to buy about 630,000 tonnes of soft wheat of optional origin.

 

The Moroccan tenders are supportive to U.S. wheat futures as they take supplies off the world market at a time when global ending stocks are already at their lowest level since 1981-82, an analyst said.

 

Egypt's state-owned General Authority for Supply Commodities said it bought 145,000 metric tonnes of Russian wheat in a tender. A breakdown of bids for the tender showed offers from the U.S. and Russia, and Russian bids have a leg up because of cheaper shipping costs, a U.S. wheat industry member wheat export ties said.

 

Egypt has recently been an active buyer on price breaks. GASC issued the latest tender after the close Monday, when U.S. wheat futures rallied to new contract highs, which indicates end users are worried about a shortage of global supplies, an analyst said.

 

"The powerful bull market rolls on amid scrambling for needs by end-users," a technical analyst said.

 

Bulls' next upside price objective is to close CBOT December wheat above resistance at US$7.00, the technical analyst said. The next downside price objective for the bears is closing prices below strong support at US$6.58, which would fill on the downside an upside price gap created on the daily bar chart.

 

First resistance is seen at Monday's contract high of US$6.85 and then at US$6.90. First support lies at US$6.78 and then at US$6.70.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing prices 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 Monday's high of US$6.66 and then at US$6.68 1/2. First support is seen at US$6.58 and then at US$6.50.

 

In other news, Japan said it was seeking 131,000 metric tonnes of wheat in a routine tender to be concluded Thursday for shipment in October.

 

The U.S. Department of Agriculture, meanwhile, rated 69% of the U.S. spring wheat crop in good-to-excellent condition as of Sunday, an increase of one percentage point from a week earlier. The increase is fundamentally bearish, but the trade will be more focused on supportive demand news, an analyst said.

 

The USDA reported winter wheat was 94% harvested, up from 88% a week earlier and compared to the five-year average of 91%. Winter wheat harvesting progress is already thought to be factored into the market, an analyst said.