August 16, 2007

 

US Wheat Outlook on Thursday: 2-4 cents down on weak outside markets

 

 

Spillover pressure from outside markets is expected to drive U.S. wheat futures lower at the start of Thursday's day session, although strong weekly export sales should temper the losses, traders said.

 

Wheat futures are called to open 2 to 4 cents down. In e-cbot overnight electronic trade, Chicago Board of Trade September wheat ended 7 cents lower at US$6.90, while CBOT December wheat slumped 5 1/2 cents to US$6.73.

 

Liquidation in global markets, including equities, metals and energy markets, fostered a weaker tone for wheat overnight, and there will be some follow-through selling in the day session, an analyst said. Sharp overnight losses in CBOT soybeans also will likely tug on wheat, he added.

 

"The markets are jittery," a CBOT floor trader said.

 

Some technical selling also will likely weigh on wheat following a bearish "outside day" down for the CBOT December contract Wednesday, traders said. Strong follow-through selling pressure Thursday would confirm a bearish "key reversal" down on the daily bar chart, a technical analyst said.

 

The key reversal would be a very early technical clue that a market top is in place, the analyst said. For now, however, the bulls still have "solid upside technical power," the technical analyst said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at the all-time high of US$7.50. The next downside price objective for the bears is closing prices below strong support at US$6.80. First resistance is seen at Wednesday's contract high of US$7.14 1/2 and then at US$7.25. First support lies at Wednesday's low of US$6.96 and then at US$6.94.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing prices above major psychological resistance at US$7.00. The bears' next downside objective is closing prices below solid support at US$6.60. First resistance is seen at Wednesday's high of US$6.88 and then at the contract high of US$6.94. First support is seen at Wednesday's low of US$6.71 and then at US$6.64 1/2.

 

Weekly export sales for the week ended Aug. 9 were 1.186 million metric tonnes, well above trade estimates of 300,000 to 500,000 tonnes. The sales were 33% above the previous week but 13% below the prior four-week average.

 

Big buyers included Egypt, which took 174,600 tonnes; Japan, which bought 132,100 tonnes; and Nigeria, which bought 130,500 tonnes. Sales will also be strong next week as the figures didn't include a sale of 415,000 tonnes of U.S. wheat to Egypt announced Tuesday, a CBOT floor trader said.

 

The U.S. has seen strong demand for its wheat this summer amid weather-related production problems in other traditional export areas, including Europe and the Black Sea region. Strategie Grains on Thursday forecast the 2007-08 E.U. soft wheat crop at 114.1 million tonnes, down 4.8 million tonnes from the July estimate.

 

Paris-based and London-based Liffe wheat futures briefly rose early to set new record highs but quickly pulled back. The new E.U. crop projection was generally in line with industry expectations.

 

Showers and thundershowers yesterday covered England, France, the Benelux region and Germany, according to DTN Meteorlogix. Rainfall is unwanted because it delays any harvest activities for winter and spring grains, the weather firm said.

 

In Australia's wheat belt, where there are some concerns about dryness, a few significant showers are possible during the next five days, but the rainfall so far has been disappointing, Meteorlogix said.