September 13, 2006

US Wheat Outlook on Wednesday: Down 1-2 cents on follow-through, technicals

U.S. wheat futures are expected to open 1-2 cents a bushel lower on follow-through sales from recent lower prices and a weak technical setup, sources said Wednesday.

Wheat futures were steady to lower in overnight e-cbot trade. Basis December contracts, Chicago Board of Trade wheat was unchanged at US$4.02 1/2, Kansas City Board of Trade was 2 cents lower at US$4.68 and Minneapolis Grain Exchange was down 1/4 cent to US$4.49 a bushel.

Corn futures are called steady to lower, which will likely pressure the wheat market. In fact, wheat is expected to track the moves in corn in the absence of fresh news and after the market has digested the U.S. Department of Agriculture's September crop data.

The lower close across the board in wheat Tuesday was a clear sign that the market needs to see a significant increase in exports or a turnaround in the feed grains before it rallies again, a broker said. But corn is expected to find harvest pressure and lead wheat lower in the near term.

The fact that the USDA lowered global wheat production and ending stocks was constructive for the market, the broker said. It also decreased U.S. ending stocks by 5 million bushels, but that resulted from an increase in food use instead of exports, which is where the market needs to see improvement.

Meanwhile, French 2006-07 soft wheat production is pegged at 33.1 million metric tonnes, down 2.2 million tonnes from last month's estimate, the state grains board Office National Interprofessional des Grandes Cultures said Wednesday. Adverse weather has trimmed yields from last year's production of 34.9 million tonnes.

E.U. soft wheat production is estimated at 111 million tonnes, down 3.5% from last year, ONIGC said.

Canada's wheat stocks were pegged at 9.743 million tonnes, nearly 2 million tonnes above the year-ago level of 7.922 million tonnes, Statistics Canada reported Tuesday.

Technically, CBOT December wheat bears have fresh downside momentum with Tuesday's price decline to two-week lows. Next support rests at the psychological US$4.00 level, while it would take a close above US$4.15 to inject fresh bullish momentum into the market, an analyst said.

Resistance is seen at US$4.05, then US$4.10. Support is pegged at US$4.00, then US$3.96 1/2.

No wheat deliveries were reported Wednesday at the Chicago Board of Trade.

Deliveries at the Kansas City Board of Trade totaled 117, with 15 posted at the Minneapolis Grain Exchange.