August 9, 2007

 

US Wheat Outlook on Thursday: 6-8 cents up on technical momentum, tight supplies

  

 

Bullish fears about dwindling world supplies and technical momentum are expected to push U.S. wheat futures 6-8c per bushel higher at the start of Thursday's day session, traders said.

 

In e-cbot overnight trading, Chicago Board of Trade September wheat climbed 10 1/4 cents to US$6.89 1/4, and CBOT December wheat rose 5 cents to US$7.06.

 

Ongoing worries about tight global ending stocks and production problems, including in Europe and the Black Sea region, continue to support prices, CBOT floor traders said. Front-month U.S. wheat futures rallied to fresh 11-year highs on the concerns Thursday.

 

Record highs in Liffe Paris-based milling wheat futures should add support, an analyst said. Recent yield results from the EU soft wheat harvest have buoyed concerns that this year's crop will be down from last season's drought-reduced crop.

 

There is "panic scrambling" by end users afraid of being caught short on supplies, a technical analyst said.

 

Morocco said it bought 130,000 metric tonnes of EU soft wheat in a tender for delivery Aug. 25 to Nov. 15. Morocco was originally tendering for 350,000 tonnes of E.U. soft wheat, plus or minus 10%.

 

Japan, meanwhile, said it bought 131,000 metric tonnes of wheat, including 71,000 tonnes of U.S. origin, in a routine tender concluded Thursday for delivery in October. The remaining wheat was from Canada and Australia.

 

Weekly U.S. wheat export sales for the week ended Aug. 2 were 890,900 metric tonnes, within trade estimates of 600,000 to 1.05 million tonnes. Major buyers included South Africa, which took 110,000 tonnes, and Taiwan, which bought 102,400 tonnes.

 

The USDA on Friday is slated to release its August crop production and supply/demand reports. Without export sales above 1 million tonnes and following double-digit gains Wednesday, traders may be reluctant to push prices too high going into the reports, a Kansas City Board of Trade floor trader said.

 

Amid crop losses in the Northern Hemisphere, the trade is waiting to find out how production will be in the Southern Hemisphere. South Australia's winter wheat production could reach record levels, but actual output depends on steady rains and mild temperatures in spring, a government crop consultant said.

 

On Tuesday, the government forecast South Australia's total 2007 winter wheat output at 3.5 million tonnes. Wheat production in South Australia in 2001 hit 4.8 million tonnes.

 

Any shower activity during the next five to seven days will be mostly confined to West Australia and Victoria, according to DTN Meteorlogix. This activity appears fairly light.

 

In Argentina, the cold but mostly dry weather pattern of this winter continues. Rain will be needed in the spring to support favorable development of this crop, especially in the southwest, Meteorlogix said.

 

Wheat bulls still have the solid upside technical advantage amid no signs of a market top being close at hand, the technical analyst said. Bulls' next upside price objective is to close CBOT December wheat above resistance at US$7.50. The next downside price objective for the bears is closing prices below strong support at US$6.58 a bushel.

 

First resistance is seen at Wednesday's contract high of US$7.04 and then at US$7.10. First support lies at US$6.90 and then at US$6.86.

 

At the KCBT, bulls' next upside price objective is closing prices above solid resistance at US$7.00, the analyst said. The bears' next downside objective is closing prices below solid support at this week's low of US$6.56.

 

First resistance is seen at Wednesday's contract high of US$6.81 and then at US$6.90. First support is seen at US$6.68 1/2 and then at today's low of US$6.65.