September 5, 2007

 

US Wheat Outlook on Wednesday: 25-30 cents higher on Egypt, limit up e-CBOT

 

 

U.S. wheat futures are expected to start Wednesday's day session 25-30 cents per bushel higher following limit-up gains overnight and with support from an Egyptian tender, floor traders said.

 

In e-cbot overnight trading, Chicago Board of Trade September wheat climbed 28 cents to US$8.35, and CBOT December wheat closed limit up, or 30 cents higher, at US$8.35 1/2. CBOT May wheat ended 30 cents higher at US$7.67.

 

Wheat futures extended their bullish trend overnight by surging to fresh all-time highs after contracts at all three U.S. exchanges settled limit up Tuesday, traders said. Follow-through buying will be a feature Wednesday amid continued concerns about shrinking global supplies, they said.

 

Shortly after the close Tuesday, Egypt's state-owned General Authority for Supply Commodities said it was tendering to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Oct. 16-31 and Nov. 1-15, on a free-on-board basis. The tender was seen as particularly bullish because it came as global wheat prices were at all-time highs, traders said.

 

The world has not yet reached the rationing point for world demand, a CBOT floor trader said.

 

"Don't be surprised if (GASC) buys Russian wheat, because Russia is considering shutting down its export program later this year due to concerns over tight domestic stocks," said Arlan Suderman, a market analyst for Farm Futures. "Egypt knows that it can always come to the U.S. market and bid for the last bushel, but end users are increasingly worried about the shelves turning up empty overseas."

 

Indeed, the markets have gone into "panic mode," with end-users scrambling to cover their needs amid weather woes in major wheat-producing regions. Dryness continues to plague Australia's crop, and little precipitation is expected in the country's wheat belt during the next seven to eight days, according to DTN Meteorlogix.

 

Australia's wheat crop this year may be no more than around 16 million tonnes, well below the officially forecast 22.5 million tonnes, due to the dry weather, the director and senior commodity trader of Plumgrove Commodity Trading Solutions Australia said. The country produced around 10 million tonnes of wheat last year following a severe drought, and there were hopes Australia would produce a strong crop this year to help rebuild global supplies.

 

Argentina also needs rainfall to ensure favorable development of wheat during the spring, Meteorlogix said. Wednesday's weather models continued to suggest at least some chance for significant rainfall later this weekend and early next week, the weather firm said.

 

U.S. wheat futures should feel further support from another rally in European markets, traders said. Liffe's Paris November milling wheat was up 5.3% in Wednesday's opening dealings at a fresh record high of EUR300 a metric tonne.

 

The bulls' next upside price objective is to push and CBOT December wheat above psychological resistance at US$8.50, a technical analyst said. The next downside price objective for the bears is closing prices below support at US$7.60, which is the bottom of a big upside price gap on the daily bar chart.

 

First resistance is seen at Tuesday's contract high of US$8.05 1/2 and then at US$8.25. First support lies at US$7.88 1/2 and then at US$7.73.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is December wheat above psychological resistance at US$8.00. The bears' next downside objective is closing prices below solid support at US$7.14, which is the bottom of a big upside price gap on the daily bar chart.

 

First resistance is seen at Tuesday's contract high of US$7.61 1/4 and then at US$7.75. First support is seen at US$7.50 and then at US$7.39.