August 24, 2006

 

US Wheat Outlook on Thursday: Up 3-5 cents; overnight strength, tech rally

 

 

U.S. wheat futures are seen starting Thursday's day session action on firm footing, continuing the overnight theme on technically inspired buying and world supply concerns.

 

In overnight electronic trading, Chicago Board of Trade September wheat was 6 1/4 cents higher at US$3.72 1/4 and CBOT December wheat was 3 1/2 cents higher at US$3.90 1/2.

 

The markets are technically oversold and with concerns over crop conditions in Australia, rallying French wheat prices and expectations of smaller Canadian production estimates, futures are poised for a little bounce, said John Kleist of Kleist Agricultural Consulting.

 

Lingering rumors of Brazilian buying interest is expected to provide optimistic hope for upside movement, traders said.

 

However, demand remains a concern to the market with only routine sales following a recent drop in prices, and news Egypt canceled a tender citing high prices, may limit upside potential, analysts add.

 

Considering the recent price break failed to stimulate much demand, the market is trying to fundamentally justify a technically inspired rally, Kleist said.

 

A market technician said despite prices closing nearer the session high on short covering Wednesday, it will take a close back above psychological resistance at US$4.00 basis December CBOT 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$3.89 1/2 - Wednesday's high - and then at US$3.95. First support lies at US$3.83 and then at US$3.79 1/4 - Wednesday's low.

 

In KCBT December wheat, the next downside objective is closing prices below solid support at last week's low of US$4.54. Prices are still in a six-week-old downtrend from the July high. The next near-term upside price objective is closing prices back above solid resistance at US$4.80.

 

First resistance is seen at this week's high of US$4.71 and then at US$4.75. First support is seen at US$4.63 and then at US$4.59 - Wednesday's low.

 

U.S. Department of Agriculture said weekly export sales for 2006/07 wheat in the week ended Aug. 17 were 393,700 metric tonnes. Trade estimates ranged from 300,000 to 550,000 tonnes. Sales were 2% above the previous week, but 14% under the prior four-week average. The biggest buyers were Nigeria at 124,400 tonnes and Egypt with 115,000 tonnes.

 

Egypt's state-owned General Authority For Supply Commodities, or GASC, said Thursday it had canceled its tender to buy wheat. GASC said bidders prices were too high and above market prices.

 

The DTN Meteorlogix Weather Service forecast said scattered thundershowers should develop through north and central of the southern plains areas Friday into Saturday. These areas continue to recharge soil moisture for fall planting. The southern part of the winter wheat belt still needs rain to reverse the effects of a hot/dry summer. This area may see thundershowers Sunday and Monday.

 

In the northern plains, there is a chance for thundershowers Thursday, mainly in North Dakota and in Minnesota, with mainly dry conditions returning again after that.

 

In global wheat news, French milling wheat futures traded on Euronext.liffe soared to fresh contract highs in Thursday's open moves. Selling interest of milling wheat has declined due to concerns over this season's lower-than-expected availability. Heat in July cut overall wheat production in the European Union and now late season rains in northern Europe have greatly lower quality to a feed grade in uncut areas.