August 22, 2007

 

US Wheat Outlook on Wednesday: Up 4-6 cents on European strength, demand

 

 

Spillover support from firmer E.U. wheat futures and ongoing bullishness about strong demand are expected to push U.S. wheat futures 4-6 cents higher at the start of Wednesday's day session, traders said.

 

In e-cbot overnight trading, Chicago Board of Trade September wheat rose 4 cents to US$6.95 1/2, and CBOT December wheat finished 5 3/4 cents higher at US$7.09 3/4.

 

London-based wheat traded on Liffe set a new record high Wednesday and that should provide upside leadership for U.S. wheat, a CBOT floor analyst said. About half of the UK's wheat crop remains in the field, with rain delays keeping final harvest results in limbo, traders said.

 

Moderate to heavy storms also have hit France and Germany again during the past couple of days. That will delay field work and any early planting activities for winter wheat, according to DTN Meteorlogix.

 

The U.S. has seen steady export business this summer amid production problems in Europe and the Black Sea region. Egypt bought U.S. wheat in a tender Tuesday, and solid sales are expected to continue in the near term, analysts said.

 

Russia's wheat output forecast is down due to a drought in important grain producing regions, according to a new U.S. Department of Agriculture attach¨¦ report. Russian wheat exports will decrease by 500,000 tonnes to 10.1 million tonnes because of the smaller crop and amid strong demand from the domestic market, the report said.

 

Concerns about potential production problems in the Southern Hemisphere also are supportive for U.S. wheat, an analyst said. In Australia, Queensland's wheat production this year will come in around 750,000 tonnes as a result of dry weather and late plantings, below the five-year average of about 1 million tonnes, according to logistics concern Cooperative Bulk Handling Ltd.

 

Beneficial rainfall is possible in southern Queensland wheat areas from Wednesday into Thursday, Meteorlogix said. Showers are also possible in West Australia wheat areas Wednesday and again during the weekend, the weather firm said.

 

In Argentina, La Pampa and western Buenos Aires wheat areas may see a light rain during the next few days, but much more rain will be needed when temperatures turn warmer in the spring, according to Meteorlogix.

 

Along with fundamental support, wheat has technical strength, with the bulls seen to be "right back in the technical driver's seat" at the CBOT following a rally Tuesday on news of the Egypt sale, a technical analyst said. The bulls' next upside price objective is to close CBOT December wheat above resistance at the contract high of US$7.14 1/2. 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 Tuesday's high of US$7.08 and then at US$7.14 1/2. First support lies at Tuesday's low of US$6.96 and then at US$6.90.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above solid resistance at the contract high of US$6.94, the technical analyst said. 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 Tuesday's high of US$6.77 and then at US$6.86. First support is seen at US$6.65 and then at US$6.60.