August 23, 2007

 

US Wheat Outlook on Thursday: 8-11 cents higher on demand, momentum, Canada

 

 

U.S. wheat futures are expected to start Thursday's day session up 8-11 cents per bushel on strong demand, a reduced estimate for Canadian production and follow-through momentum from advances to historic highs, analysts said.

 

In e-cbot overnight trade, Chicago Board of Trade September wheat climbed 11 cents to US$7.29 1/2, and CBOT December wheat rose 11 1/2 cents to US$7.43.

 

The contracts are within striking distance of the all-time high for a nearby CBOT wheat contract of US$7.50. CBOT December wheat is already trading at an all-time high for a second-month contract.

 

Further gains are expected following another bullish weekly export sales report, a CBOT floor trader said. The U.S. Department of Agriculture said sales for the week ended Aug. 16 totaled 1.05 million metric tonnes, within trade estimates of 700,000 to 1.2 million tonnes.

 

Despite high prices, demand for U.S. wheat has been strong recently amid tight global stocks. India's government-run State Trading Corp. confirmed Thursday a tender to import wheat, seeking deliveries between October and December, but didn't specify the volume.

 

The U.S. isn't expected to win any of the business due to strict quality requirements, but the tender will still take supplies off the world market, which is supportive. The tender closes on Aug. 29 and bids must be valid till Sept. 3.

 

In a new report, Statistics Canada pegged all-wheat production at 20.322 million tonnes, below trade estimates of 20.8 million to 22.9 million tonnes and down from Canada's 2006-07 all-wheat production of 25.265 million tonnes. The trade was aware of some crop losses in Canada due to heat in July, although the new estimate is still "very bullish" because it is below trade estimates, a CBOT floor broker said.

 

U.S. wheat futures also should feel a boost from strength in European markets, analysts said. Paris-based milling wheat futures traded on Liffe opened on a record high Thursday on tight global supplies and spillover strength from U.S. wheat futures.

 

The U.S. and E.U. wheat markets are feeding on each other, a CBOT floor trader said. Rain also continues to fall in parts of the U.K. to further delay the remaining wheat harvest and threaten quality and yields.

 

The bulls' next upside price objective is to push CBOT December wheat above resistance at the all-time nearby high of US$7.50, a technical analyst said. The next downside price objective for the bears is closing prices below strong psychological support at US$7.00 a bushel. First resistance is seen at Wednesday's contract high of US$7.34 and then at US$7.40. First support lies at US$7.25 and then at US$7.20.

 

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 Wednesday's high of US$6.88 and then at US$6.94. First support is seen at Wednesday's low of US$6.76 and then at US$6.70.