September 20, 2007

 

US Wheat Outlook on Thursday: 5-7 cents higher on strong demand, overnight

 

 

U.S. wheat futures are called to start Thursday's day session 5 to 7 cents per bushel higher on strong export demand and firmer trade overnight, traders said.

 

In e-cbot overnight trading, Chicago Board of Trade December wheat rose 5 1/4 cents to US$8.50 1/4.

 

Although U.S. wheat futures climbed to all-time high prices last week, export sales remained strong, according to new data from the U.S. Department of Agriculture. The agency said sales of 2007-08 and 2008-09 wheat for the week ended Sep. 13 totaled 1.6 million metric tonnes, above trade expectations of 600,000 to 1.5 million tonnes.

 

For the 2007-08 crop, sales of 1.44 metric tonnes were 33% below the previous week but 12% over the prior four-week average, according to the USDA. Top buyers included Nigeria, which took 182,400 tonnes, Algeria, which bought 115,200 tonnes, and unknown destinations, which bought 368,100 tonnes.

 

Sales of 160,200 tonnes for delivery in 2008-09 were primarily for Kenya, which bought 130,000 tonnes.

 

"The export sales are supportive," a CBOT floor broker said.

 

In other export news, the Taiwan Flour Millers Association bought 88,000 metric tonnes of U.S. No. 1 wheat from trading house Mitsui in a tender concluded on Thursday, an association official said. The first shipment will arrive in Taiwan Oct. 22-Nov. 15, and the second Nov. 4-18.

 

Japan said it bought 115,000 metric tonnes of wheat, including 75,000 tonnes from the U.S., in a tender concluded Thursday. The entire shipment is expected to arrive in November.

 

The Russian government, meanwhile, said it may impose an export duty of 10% on grain next week, when the government plans to announce the conditions of grain interventions on the domestic market, according to a report. The news may not have a big impact on the markets as traders previously had speculated about the possibility of a suspension of or tax on Russian wheat exports.

 

However, renewed chatter about the likelihood of an export duty may bring the idea back into traders' heads, which would be supportive, a CBOT floor trader said. Russia is considering an export duty, in part, to control rising grain prices.

 

Trading could be two-sided Thursday following two-days of losses, traders said. Fundamentals remain bullish, but the market has worked itself into a bit of a consolidative trend, they said.

 

Turning to the weather, some scattered light rain fell in Australia over southeast portions of South Australia, Victoria and southern New South Wales, although forecasts calls for mostly dry conditions Thursday to Sunday, DTN Meteorlogix said. Dryness in growing regions remains a major concern and further crop losses are expected from the unfavorable conditions, traders said.

 

In Argentina, the Meteorlogix outlook calls for dry conditions or just a few light showers during the next seven days. Soil moisture has improved significantly across the main growing areas of central Argentina during the past week.

 

In the U.S. central and southern Plains, drier weather is expected through Sunday, Meteorlogix said. Conditions are generally favorable for planting and emerging wheat, although more rain would benefit some southwest areas.

 

Prospects for better wheat yields in 2008-09 and profit-taking should limit wheat price gains, according to a Standard Chartered report. Due to current tight wheat supplies, wheat should hold above US$7 per bushel before easing in 3Q 2008 to adjust for likely crop Improvements, the report said.

 

CBOT December wheat Wednesday briefly traded limit down and closed sharply lower on profit-taking, but no serious chart damage occurred, a technical analyst said. Still, it will be difficult for the wheat market to find the steady flow of fresh, supportive fundamental news needed "to satisfy a very hungry bull," he said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above solid resistance at this week's high of US$8.81, the 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 Wednesday's high of US$8.60 and then at US$8.65 - the top of Wednesday's downside price gap on the daily bar chart. First support lies at Wednesday's low of US$8.39 and then at US$8.30.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above solid resistance at this week's high of US$8.65, the analyst said. The bears' next downside objective is closing prices below psychological support at US$8.00.

 

First resistance is seen at Wednesday's high of US$8.38 1/2 and then at US$8.47 - the top of Wednesday's downside price gap. First support is seen at Wednesday's low of US$8.18 3/4 and then at US$8.06.