August 23, 2006

 

US Wheat Outlook on Wednesday: Flat-up 1 cent; choppy trade expected

 

 

U.S. wheat futures are poised for a steady to firm opening, based on overnight price action, but traders see the potential for two-sided trade amid the absence of fresh directives in the market.

 

In overnight electronic trading, Chicago Board of Trade September wheat was 1 cent higher at US$3.60 3/4 and CBOT December wheat was 1 cent higher at US$3.81. The lack of direction from its own fundamentals or from outside markets should promote a choppy, sideways theme, said Shawn McCambridge, senior grains analyst with Prudential Financial in Chicago.

 

The market is in a lull, consolidating in range bound action, awaiting export business to develop after recent price breaks, added McCambridge.

 

The lack of conviction on the part of buyers and sellers have allowed daily trading volumes to drop off, with traders seeing downside movement as the path of least resistance, particularly in a time when the market is starving for fresh news.

 

Wheat futures have reached oversold levels, but with speculative funds dumping long positions on rallies, upside movement remains limited in the absence of fresh news, a CBOT commission house broker added.

 

A technical analyst said serious near-term chart damage has occurred recently. It will take a close back above psychological resistance at US$4.00 basis CBOT December wheat to begin to provide some fresh upside technical momentum. The next downside price objective is closing prices below solid support at last week's low of US$3.76 3/4 a bushel.

 

First resistance is seen at US$3.85 1/2 - Tuesday's high - and then at US$3.90. First support lies at US$3.78 1/4 - Tuesday's low - and then at US$3.76 3/4.

 

The DTN Meteorlogix Weather Service forecast said scattered thundershowers should develop through north and central areas of the southern plains Friday into Saturday. These rains continue to recharge soil moisture for fall planting, with the southern part of the belt still needing rain to reverse the effects of a hot/dry summer.

 

In the northern plains, there is a chance for thundershowers during the next few days, mainly in North Dakota and in Minnesota. There are no significant concerns for the on going harvest of drought reduced crops, Meteorlogix said in the forecast.

 

Meanwhile, any shower activity in Argentine wheat areas during Friday and the weekend should be light, except possibly through eastern locations. Additional cold weather is possible early next week, after warmer weather for the balance of this week, Meteorlogix added.

 

In global wheat news, the U.K. exported 75,496 metric tonnes of wheat in June, the last month of the 2005-06 marketing year, which is a 43% fall from May, U.K. trade data issued through the Home Grown Cereals Authority showed Wednesday. At the end of the 2005-06 marketing year, U.K. wheat exports totaled 2.278 million tonnes, down 27% from 2004-05.

 

Contracts for the export of grain harvested this year, concluded at Ukraine's agrarian exchanges, totaled 2.16 million metric tonnes to Aug. 23, according to the agrarian exchanges' union. Exporters are contracting wheat and barley for export at present time, the union said.