August 17, 2007

 

US Wheat Outlook on Friday: Mixed start, looking toward outside markets

 

 

U.S. wheat futures are expected to start Friday's day session mixed after a mixed overnight trade, with an eye looking toward outside markets, analysts said.

 

In e-cbot overnight trading, Chicago Board of Trade September wheat rose 3/4 cent to US$6.73 3/4 per bushel, and CBOT December wheat fell 1/2 cent to US$6.87.

 

Volatility in outside markets is expected to remain a factor for wheat, following a commodity-wide sell-off Thursday that pressured grains, traders said. Wheat still has a bullish storyline amid global production problems and tight ending stocks, but the grains markets are focusing on money-flows, not fundamentals, an analyst said.

 

Wheat may be able to rebound from Thursday's losses as U.S. stock futures surged Friday on news the Federal Reserve cut its discount interest rates, an analyst said. Still, analysts said it was not clear whether the worst of the sell-off was over yet and that shifts in equity markets could control the direction of the grains.

 

U.S. wheat futures climbed to fresh contract and 11-year highs earlier this week. However, Thursday's heavy liquidation produced a bearish "key reversal" down for CBOT December wheat on the daily bar chart, one very early technical clue that a market top is in place, a technical analyst said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at US$7.00. The next downside price objective for the bears is closing prices below strong support at Thursday's low of US$6.70. First resistance is seen at Thursday's high of US$6.97 and then at US$7.00. First support lies at US$6.80 and then at US$6.70.

 

At the Kansas City Board of Trade, wheat bulls still have the technical advantage amid no signs of a market top, the technical analyst said. However, the big declines in most raw commodity prices Thursday should be a warning to the bulls, he said.

 

The bulls' next upside price objective is closing KCBT December wheat above solid resistance at the contract high of US$6.94. The bears' next downside objective is closing prices below solid support at Thursday's low of US$6.49. First resistance is seen at Thursday's high of US$6.73 and then at US$6.81. First support is seen at US$6.60 and then at US$6.49.

 

Along with global tightness, concerns about growing conditions in the Southern Hemisphere are fundamentally supportive for wheat, traders said.

 

Areas of Australia need more rain. A few significant showers were reported in New South Wales and Queensland in Australia during the past 24 hours but with low coverage. Higher coverage showers are possible during the weekend but mostly for southeast Queensland, DTN Meteorlogix said.

 

In Argentina, a very cold air mass is in place over the country's southern wheat areas Friday and should cause another unfavorable, widespread freeze event, Meteorlogix said. There is no significant rainfall in sight for La Pampa or Buenos Aires wheat areas.

 

Argentina's Agriculture Secretariat trimmed its wheat forecast in its monthly crop report due to dry weather in the southern areas of Buenos Aires and La Pampa provinces and the northern provinces of Chaco, Tucuman and Santiago del Estero. A lack of rain caused some farmers to abandon plans to plant wheat, the Secretariat said.

 

Crop conditions are generally favorable, although dryness in the center and north of La Pampa and Cordoba provinces may cut yields in those areas. Farmers have planted 92% of the 2007-08 wheat crop to date, in line with last year's pace, according to the Secretariat.

 

Another very cold air mass is in place over Argentina's southern wheat areas Friday and should cause another unfavorable, widespread freeze event, Meteorlogix said. There is no significant rainfall in sight for La Pampa or Buenos Aires wheat areas.

 

In other news, Japan said it bought 70,000 metric tonnes of U.S. wheat in a routine tender concluded Thursday.