August 20, 2007

 

US Wheat Outlook on Monday: 2-4 cents lower, taking cue from overnight

 

 

U.S. wheat futures are expected to start Monday's day session on the defensive following lower trade overnight and a lack of bullish news, traders said.

 

CBOT wheat futures are called to open down 2-4 cents per bushel. In e-cbot overnight trade, CBOT September wheat ended 2 1/2 cents lower at US$6.69 1/2, and CBOT December wheat finished down 4 cents at US$6.84 1/2.

 

There was not much fresh news out during the weekend to feed the bulls, an analyst said. Tight global supplies remain a concern but are largely factored into the market by now, he said.

 

The U.S. has seen strong demand for several weeks in a row, but the weekend didn't bring word of any major new sales, the analyst said. A senior government official in India said the country plans to issue a tender to import wheat shortly, but traders said they were wanted more concrete details before getting too excited.

 

The U.S. Department of Agriculture is slated to release weekly export inspections data at 11 a.m. EDT (1500 GMT) Monday.

 

Wheat futures showed strength Friday by shaking off heavy losses to finish the session near unchanged, a CBOT floor broker said. Still, CBOT December wheat last week produced a bearish "key reversal" down on the daily bar chart, which is 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, he said. The next downside price objective for the bears is closing prices below strong support at last week's low of US$6.70.

 

First resistance is seen at US$6.90 and then at US$6.97. First support lies at US$6.80 and then at US$6.70.

 

Non-commercial speculative funds cut long and short CBOT wheat futures and options positions as of Aug. 14, according to a Commodity Futures Trading Commission supplemental report. The funds cut longs by 2,441 lots, shorts by 7,233 lots and were net long 11,948 contracts, the CFTC said.

 

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. 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 last week's low of US$6.49.

 

First resistance is seen at Friday's high of US$6.65 1/2 and then at US$6.70. First support is seen at Friday's low of US$6.56 and then at US$6.49.

 

Speculative funds increased long KCBT wheat futures and options by 153 lots, cut shorts by 90 lots and were net long 41,098 contracts, according to another CFTC supplemental report. At the MGE, speculative funds increased long positions by 1,474 lots, cut shorts by 252 lots, and were net long 16,163 contracts, the CFTC said.

 

There may be some harvest delays for spring wheat, traded at the MGE, on the U.S. Northern Plains due to rain and storms in South Dakota, DTN Meteorlogix said in a forecast. Otherwise, there are no significant concerns for the crop harvest.

 

In Australia, 0.25 to 1.00 inch of rain, with heavier totals locally, fell through wheat areas of southeast Queensland during the weekend period and in the east part of New South Wales wheat belt, Meteorlogix said. The west part of West Australia's wheat belt received rain. Shower activity during the next seven days may tend to favor the West Australia wheat areas, Meteorlogix said.

 

The rains in Australia are bearish, an analyst said, although there remain concerns about production in the Southern Hemisphere.

 

In Argentina, there is no significant rainfall in sight for dry wheat areas of La Pampa or Buenos Aires, Meteorlogix said. Temperatures turn warmer early this week and colder again later in the week, the weather firm said.

 

In China, wheat prices were higher in the week to Monday, as farmers were reluctant to sell in expectation of better prices. New wheat purchase prices in Jinan city, the capital of Shandong province, were between RMB1,580-RMB1,620 a metric tonne, up from RMB1,540-RMB1,580/tonne a week ago.