September 19, 2007

 

US Wheat Outlook on Wednesday: 8-12 cents lower on profit-taking

 

 

Profit-taking is expected to drag U.S. wheat futures lower at the start of Wednesday's day session amid a lack of fresh bullish news, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 8 to 12 cents per bushel lower. In e-CBOT overnight trading, CBOT December wheat slipped 13 3/4 cents to US$8.55 1/4.

 

With few fresh, supportive developments for bulls to feed on, wheat futures look poised to consolidate, analysts said. Prices are already high, and end users will have to continue buying for wheat to climb to higher prices, Farm Futures analyst Arlan Suderman said.

 

"The lineup of new tenders is beginning to slow, suggesting that panic is easing," Suderman said in a market comment.

 

Australia lowered its official wheat crop forecast Tuesday due to dryness, and "end users will still be quite anxious about Australia's final production numbers," Suderman said. However, "a bit of the urgency appears to be gone for now," he said.

 

The weather outlook for Australia's wheat growing areas looks to be about the same as it has been in recent days, with dry conditions expected to persist for the next 10 days, DTN Meteorlogix said. The Meteorlogix outlook calls for light, scattered showers over Victoria and southern New South Wales on Wednesday.

 

Argentina, meanwhile, has had beneficial rains lately, meteorologists said. The outlook now calls for dry conditions there during the next 48 hours.

 

The majority of Argentina's Pampas, where grain production is centered, have optimal or good soil moisture levels, with areas on the fringes showing normal or light drought conditions, according to Tuesday's report from the Buenos Aires Cereals Exchange. The wheat crop showed a notable recovery from cold dry weather, auguring better potential yields, the exchange said.

 

In the U.S., drier weather is seen on the central and southern Plains during the next five days, but some showers could develop early next week, according to Meteorlogix. Conditions are "generally favorable" for planting and emerging wheat, although more rain would benefit in some southwest areas, the weather firm said.

 

Looking at technical charts, closes above US$9.07 in CBOT December wheat would renew this summer's rally, thereby opening the door for a possible test of US$9.25 later this year, a technical analyst said. Closes below last Friday's low crossing at US$8.30 would signal that a short-term top has been posted, opening the door for a larger-degree correction during September, he said.

 

At the Kansas City Board of Trade, closes above US$8.80 in the December contract would renew the summer's rally and open the door for a possible test of psychological resistance crossing at US$9.00, the analyst said. Closes below last week's low crossing at US$8.06 would signal that a short-term top has been posted, and potentially allow for a larger-degree decline during September, he said.

 

In European markets, Liffe's Paris milling wheat futures sank to a two-week low of EUR257.75/tonne on continued profit taking Wednesday, a broker said. A weaker U.S. dollar could bring fresh buying at the CBOT, which could spillover to support European markets, he said.