September 7, 2007

 

US Wheat Outlook on Friday: 4-6 cents down on overnight, profit-taking

 

 

U.S. wheat futures are called to open Friday's day session 4-6 cents per bushel lower on profit-taking amid declines in European markets, analysts said

 

In e-cbot overnight electronic trading, Chicago Board of Trade December wheat closed down 3 1/4 cents at US$8.20 3/4.

 

Wheat still has room for more of a correction after surging to all-time highs this week, CBOT floor traders said. The markets are overdue for a setback, and profit-taking in French wheat futures is setting a weaker tone for U.S. futures, they added.

 

Traders are nervous with prices at elevated levels and may want to take profits going into the weekend, a CBOT floor analyst said.

 

The U.S. Department of Agriculture, meanwhile, said sales for the week ended Aug. 30 were 718,600 metric tonnes, at the low end of trade estimates for 700,000 to 1.2 million tonnes. The sales were 42% below the previous week and 34% under the prior four-week average.

 

It was only the second time in the last eight weekly export reports in which sales were below 1 million tonnes. Some analysts had said export sales this week would give traders an idea about whether surging wheat futures prices were starting to ration demand.

 

However, the report is nothing to get too bearish about, a CBOT floor broker said. There is still a lot of business being done, and nothing has fundamentally changed for wheat, he said.

 

World stocks are still historically tight and the trade still nervous about dry weather in the Southern Hemisphere, the broker said. Nobody should press the market too hard based on the sales data, he said.

 

Shower activity in west Australia wheat areas Friday looks to be fairly light, although showers may develop in the area next Wednesday, according to the DTN Meteorlogix forecast. There is a chance for 0.10-0.50 inch of rain, with locally heavier totals, in Victoria and southern New South Wales this coming Monday, the weather firm said.

 

"Otherwise the eight-day period is mostly dry," Meteorlogix said. "Rainfall is needed in all areas but it is especially needed in northern areas of the west and southern areas of the east."

 

Argentina, on the other hand, is expected to see increasing rainfall during the next five to seven days, Meteorlogix said. That should help replenish soil moisture for early spring growth.

 

Prices slumped in a corrective set back Thursday, with CBOT December wheat scoring a "mildly bearish" outside day down on the daily bar chart, a technical analyst said. If there is strong follow-through selling pressure Friday, then a bearish "key reversal" down on the daily chart would be confirmed, he said.

 

"But make no mistake, right now the bulls still have solid technical power," the analyst said.

 

Bulls' next upside price objective is to push and close CBOT December wheat above resistance at Thursday's contract high of US$8.38. The next downside price objective for the bears is closing prices below psychological support at US$8.00. First resistance is seen at Thursday's contract high of US$8.38 and then at US$8.50. First support lies at Thursday's low of US$8.14 and then at US$8.05 1/2.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing prices above resistance at Thursday's contract high of US$8.00, the analyst said. The bears' next downside objective is closing prices below psychological support at US$7.50. First resistance is seen at Thursday's contract high of US$8.00 and then at US$8.25. First support is seen at Thursday's low of US$7.77 and then at US$7.60.