August 24, 2007

 

US Wheat Outlook on Friday: Steady-2 cents higher; choppy trade expected

 

 

U.S. wheat futures are called to start Friday's day session steady to 2 cents higher, with trading expected to be choppy following recent strength and amid expiration for September options, analysts said.

 

In e-cbot overnight trading, Chicago Board of Trade September wheat rose 3/4 cent to US$7.23 1/4, and CBOT December wheat finished unchanged at US$7.39.

 

CBOT December wheat prices Thursday hit a fresh contract and all-time record high of US$7.54 and closed near mid-range. Traders may want to take some profits going into the weekend as the contract is already up more than 50 cents on the week so far, an analyst said.

 

"We're up quite a bit this week," said Brian Hoops, analyst with Midwest Market Solutions. "We could easily have some sort of a setback."

 

Friday also marks the expiration of September options, which could make trading "dicey," a CBOT floor trader said. Traders will likely exercise a good number of options, an analyst said.

 

To exercise an option, the holder of a call option purchases the underlying futures contract or the holder of a put option sells the underlying futures contract. Traders who exercise options in long futures may get out of those positions early, an analyst said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above resistance at Thursday's all-time high of US$7.54, a market technician said. The next downside price objective for the bears is closing prices below strong psychological support at US$7.00.

 

First resistance is seen at Thursday's contract high of US$7.54 and then at US$7.60. First support lies at Thursday's low of US$7.24 and then at US$7.14 1/2.

 

At the Kansas City Board of Trade, bulls still have the technical advantage amid no signs of a market top. Bulls' next upside price objective is closing KCBT December wheat above solid resistance at Thursday's contract high of US$7.00, the technician said. The bears' next downside objective is closing prices below solid support at US$6.70.

 

First resistance is seen at Thursday's contract high of US$7.00 and then at US$7.10. First support is seen at Thursday's low of US$6.75 and then at US$6.70.

 

There was not much fresh fundamental news out overnight, traders said.

 

Rains Thursday in Australia's southeast Queensland were heaviest to the east of the major wheat areas, according to DTN Meteorlogix. Shower threats during the next seven days will be mostly for West Australia with one front Sunday and a second front Wednesday, the weather firm said.

 

Conditions in wheat-growing areas of Argentina should stay mainly dry or received only a few very light showers during the next seven to 10 days, Meteorlogix said. Rainfall will be needed in most of this area to ensure favorable development of wheat during the spring.

 

In other news, Russia can export about 10 million metric tonnes of grain harvested this year, according to the agriculture ministry. An official said Russia harvested 52 million tonnes of grain to date, five million tonnes more than on the same date last year, and that the quality of the grain was "no worse than last year."

 

Japan's Ministry of Agriculture, meanwhile, will increase the price at which it sells imported wheat to flour millers by 10%, effective from Oct. 1, a ministry official said. The hike is due to the sharp rise in CBOT wheat futures over the past several weeks, officials said.