September 14, 2007

 

US Wheat Outlook on Friday: 6-8 cents lower on follow-through liquidation

 

 

U.S. wheat futures are expected to start Friday's day session lower on follow-through long liquidation and profit-taking as the markets extend their setback from record highs, analysts said.

 

Wheat futures are called to open 6 to 8 cents per bushel lower. In e-cbot overnight trading, Chicago Board of Trade December wheat tumbled 8 3/4 cents to US$8.38 1/4.

 

Profit-taking and technical selling have dragged wheat futures to lower closes for the past two day sessions. Prices slipped Wednesday even though the U.S. Department of Agriculture announced the strongest weekly export sales in more than a decade.

 

The sell-off in the face of bullish news was "a bearish clue that all the bullish news has been factored into wheat futures prices," a technical analyst said. "Bulls are fading."

 

Some near-term chart damage has occurred and is beginning to suggest that a near-term or even a major top is in place, the analyst said. A weekly low close on Friday would add to that notion, he said.

 

"The market's looking tired," a CBOT floor broker said. "The bull needs to be fed every day."

 

Bulls' next upside price objective is to push and close CBOT December wheat above the intraday contract high of US$9.07. 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 high of US$8.63 1/2 and then at US$8.72. First support lies at Thursday's low of US$8.31 and then at US$8.14.

 

At the Kansas City Board of Trade, no serious chart damage occurred from Wednesday's losses, but a weekly low close on Friday would begin to produce some damage and suggest a top is in place, the technical analyst said.

 

The bulls' next upside price objective is closing KCBT December wheat above solid resistance at the contract high of US$8.80, he said. The bears' next downside objective is closing prices below psychological support at US$8.00. First resistance is seen at Thursday's high of US$8.39 and then at US$8.50. First support is seen at Thursday's low of US$8.06 and then at US$8.00.

 

In European markets, Liffe's Paris November milling wheat stumbled on recent weakness in CBOT wheat. However, traders expect losses to be limited due to historically tight stocks.

 

Indeed, wheat still has a strong fundamental storyline, particularly amid uncertainty about the size of Australia's crop after an extensive period of dryness, traders said. The forecast for Australia going into the weekend looks dry, as it has all week, traders said.

 

Any shower activity in Australia during the next seven days will be light and mostly confined to Victoria and southern portions of West Australia, according to the DTN Meteorlogix forecast. Further losses to production can be expected under the current deficient rainfall pattern, the weather firm said.

 

Argentina has had better luck with moisture in its wheat fields recently. Light to moderate rain, with some locally heavier totals over southern Buenos Aires, were observed during the past 24 hours.

 

Episodes of scattered rain, showers and thunderstorms are expected to continue into Tuesday of next week, Meteorlogix said. The precipitation will "greatly improve" conditions for the developing crop, the firm said.

 

In other news, Ukraine is likely to extend the current grain export quotas until Jan. 1, 2008, and not Oct. 1 as was previously planned, the press service of the agriculture ministry reported.