September 15, 2006

 

US Wheat Outlook on Friday: Flat to up 1 cent in minor technical bounce

 

 

U.S. wheat futures are expected to open steady to 1 cent a bushel higher Friday as prices attempt to rebound technically from recent steep losses amid oversold conditions, but with little fresh market-moving news around to sustain a rally, sources said Friday.

 

Wheat futures were mixed in overnight trade. Basis December contracts, Chicago Board of Trade wheat was up 1/2 cent at US$3.91 while Kansas City Board of Trade wheat was down 1/4 cent at US$4.58 3/4 a bushel. Minneapolis Grain Exchange wheat did not trade.

 

CBOT and KCBT wheat futures have fallen to three- and four-week lows, while Minneapolis futures hit four-month lows Thursday. Post-harvest pressure combined with a lack of U.S. export business is weighing on the market, and recently beneficial rains over the southern U.S. Plains have improved prospects for the new hard red winter crop and pressured prices.

 

Wheat may be at the mercy of the trade in corn, however, which is expected to open mixed, amid a lack of fresh news to drive prices in either direction, a trader said. The weak technical setup for wheat could cause additional selling pressure, though prices could post a minor technical bounce amid oversold conditions.

 

Meanwhile, Ukraine harvested 14.86 million metric tonnes of wheat to Wednesday, down 26% from the 20.04 million tonnes harvested by the same date last year, the government said. The total grain harvest to Wednesday was 30.14 million tonnes, down 9.9% from the same time last year.

 

A locust outbreak is threatening the drought-ravaged wheat crops of Western Australia, reports said. The outbreak is expected to occur over a large area and would have a devastating effect on production across the northern wheat belt, a government entomologist said.

 

India will likely produce around 4.5 million tonnes more wheat on the year in 2007 in a push to expand both planted area and yields, Agriculture Secretary Radha Singh said Friday. The country is expected to be the world's largest importer in the year to March 2007, at nearly 8.5 million tonnes, due to a production shortfall.

 

Some U.S. cash wheat basis bids reached five-month lows Thursday, pressured by the falling futures markets and a significant lack of U.S. export business. Cash prices for spring wheat traded to April lows, while winter wheat prices weakened to three-week lows.

 

Technically, CBOT December wheat bears gained additional downside momentum with Thursday's lower close to fresh three-week lows. The bears' next objective will be to close prices below the US$3.76 3/4 August low. It would take a close above resistance at US$4.15, however, to give bulls fresh momentum.

 

Resistance is pegged at US$3.95 and US$4.00, while support is found at US$3.89 1/2 and US$3.85.

 

Meanwhile, wheat deliveries at the Chicago Board of Trade totaled 41 on Friday. Man Financial stopped 22, ABN Amro stopped 18 and Fimat stopped one.

 

No deliveries were reported at the Kansas City Board of Trade. At the Minneapolis Grain Exchange, 127 were deliveries were made with ADM stopping them.