August 30, 2007

 

US Wheat Outlook on Thursday: 20-25 cents higher on exports, follow-through

 

 

Strong export demand and follow-through buying from an overnight rally to new record highs are expected to drive U.S. wheat futures sharply higher Thursday, analysts said.

 

Wheat futures are called to open up 20-25 cents per bushel. In e-cbot overnight trading, CBOT September wheat rallied 23 1/2 cents to US$7.65 1/2, and CBOT December wheat rose 23 cents to US$7.81 1/2.

 

Prices climbed overnight after sailing to fresh contract and all-time highs Wednesday. CBOT December wheat hit a new all-time high of US$6.83 1/2 overnight following a move to a new all-time high of US$7.60 during Wednesday's day session.

 

Carryover buying should be a feature, with support from a rally in European wheat futures, CBOT floor traders said. Liffe's Paris-based November milling wheat milling wheat futures hit a new record high Thursday amid the gains at the CBOT and continued nervousness about historically tight global wheat supplies, traders said.

 

Export demand also continues to be supportive for U.S. wheat futures. The U.S. Department of Agriculture said sales for the week ended Aug. 23 totaled 1.23 million metric tonnes, exceeding trade estimates of 700,000 to 1.1 million tonnes.

 

Big buyers included Egypt, which took 322,000 tonnes; Cuba, which bought 102,400 tonnes; and the Dominican Republic, which bought 76,300 tonnes, according to the USDA. Unknown destinations took 197,200 tonnes.

 

Bullish concerns about dryness in wheat-growing areas of Australia are another supportive factor, the broker said. Any shower activity during the next seven days is expected to be light and mostly confined to West Australia and Victoria, DTN Meteorlogix said. Rainfall is needed to ensure favorable development of wheat as temperatures turn warmer during the spring.

 

Argentina also is forecast to be mainly dry during the next seven days, Meteorlogix said.

 

In other news, Iraq has issued a new tender to buy at least 50,000 metric tonnes of hard wheat the Grain Board of Iraq said on its Web site Thursday. The tender should not impact market activity much as the trade has been talking about the tender for the past week, a CBOT floor broker said.

 

Ukraine, meanwhile, will be able to export four million metric tonnes of grain in the 2007-2008 marketing year, compared with 9.6 million tonnes in 2006-2007, the agriculture ministry said. At the present time, there is a virtual ban on grain exports in Ukraine due to production losses from a severe drought, but the ban is expected to be lifted in October.

 

The bulls' next upside price objective is to push and close CBOT December wheat above psychological resistance at US$8.00, a technical analyst said. The next downside price objective for the bears is closing prices below support at US$7.24. First resistance is seen at Wednesday's contract high of US$7.60 and then at US$7.75. First support lies at US$7.54 and then at US$7.45.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing KCBT December wheat above solid resistance at US$7.44, the analyst said. The bears' next downside objective is closing prices below solid support at US$6.80. First resistance is seen at Wednesday's contract high of US$7.14 and then at US$7.20. First support is seen at US$7.00 and then at Wednesday's low of US$6.96 1/2.