September 13, 2007

 

US Wheat Outlook on Thursday: Mixed start; record export sales support

 

 

U.S. wheat futures are expected to start Thursday's day session mixed following losses overnight and bullish news of record high weekly export sales data, floor traders said.

 

In e-cbot overnight trading, Chicago Board of Trade December wheat slipped 4 3/4 cents to US$8.55 3/4 per bushel.

 

The overnight slide came as technical selling weighed on prices after CBOT December and March wheat closed limit down, 30 cents lower, Wednesday, traders said. Prices settled at or near limit up Tuesday, and traders may want to take a step back from the volatile markets Thursday, a CBOT floor broker said.

 

Nothing has happened to change the bullish fundamentals of the market, an analyst said. Weekly export sales for the week ended Sep. 6 were a marketing year and all-time high, despite record high prices, traders said.

 

Sales of 2.13 million metric tonnes were far above analysts' expectations of 1-1.45 million and seen as highly bullish, traders said. Top buyers included Egypt, which took 413,800 tonnes; unknown destinations, which bought 350,800 tonnes; and Iraq, which bought 200,000 tonnes.

 

Separate from the export sales report, Japan said it bought 155,000 metric tonnes of wheat in a tender, including 95,000 tonnes from the U.S, for delivery Oct. 1-Nov. 15. The rest of the wheat came from Australia and Canada.

 

"The job of the market is to ration the crop and so far, there is no evidence of any rationing being done," said Brian Hoops, analyst for Midwest Market Solutions, in a comment.

 

Dryness in Australia and uncertainty about production down under remain supportive, traders said. The USDA on Wednesday trimmed its estimate for Australia's crop to 21 million tonnes from 23 million tonnes in August.

 

However, forecasts from Australian analysts and industry members had already downgraded the crop to well below the USDA's latest number. The window of opportunity for rain to rejuvenate moisture-stressed crops has now all but closed, except in southern growing areas, industry members said.

 

During the past week, the estimated output range is now seen at 12-19 million tonnes, with most in the industry focused on lower end. The DTN Meteorlogix forecast predicts any shower activity in Australia during the next seven days will be mainly confined to southern areas of West Australia and Victoria.

 

The new wheat crop in Western Australia will likely amount to 3.5-5 million tonnes, the operations manager at logistics concern Cooperative Bulk Handling Ltd. said. Anything below 5 million tonnes would put output lower than last year's drought-affected crop of 5 million tonnes.

 

In other news, Strategie Grains Thursday increased its projection for the European Union's 2007-08 wheat crop by 600,000 tonnes from the previous month's forecast. The E.U. 2007-08 soft wheat crop is now seen at 114.7 million tonnes, down 2% on the year.

 

The increase is small and the adjustment is considered "no bid deal," the CBOT floor broker said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above Wednesday's high of US$9.07, a technical analyst said. The next downside price objective for the bears is closing prices below psychological support at US$8.00. First resistance is seen at US$8.91 and then at US$9.00. First support lies at US$8.50 and then at US$8.35.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above solid resistance at the contract high of US$8.80, the analyst said. The bears' next downside objective is closing prices below solid support at US$8.10, which would fill on the downside this week's upside price gap on the daily bar chart. First resistance is seen at US$8.59 and then at US$8.80. First support is seen at US$8.22 and then at US$8.10.