September 27, 2007

 

US Wheat Outlook on Thursday: Up 15-20 cents on robust demand, momentum

 

 

U.S. wheat futures are poised to start Thursday's day session sharply higher on booming export business and follow-through buying from a rally to record prices, traders and analysts said.

 

Wheat futures are called to open 15 to 20 cents per bushel higher.

 

In e-CBOT overnight trading, Chicago Board of Trade December wheat closed up 18 cents at US$9.35 1/4. CBOT March wheat overnight set a new all-time high of US$9.42, exceeding the previous high of US$9.22 set Wednesday.

 

Carryover buying and bullish momentum should boost prices again, with little upside technical resistance expected as prices are in "uncharted territory," an analyst said. Fundamentals of the market also remain strong, as the U.S. continues to see strong demand and Australia's crop continues to suffer from drought, he said.

 

Despite solid technical and fundamental support, trading is expected to remain volatile, with market participants nervous at high price levels, a CBOT floor trader said.

 

"Sentiment is positive, but intraday swings are big," he said. "It's going to be a tough day."

 

The U.S. Department of Agriculture reported private export sales of 232,000 metric tonnes of hard red winter wheat for delivery to unknown destinations in the 2007-08 marketing year. The wheat marketing year began June 1.

 

In a separate announcement, the USDA said weekly export sales for the week ended Sept. 20 totaled 1.56 million metric tonnes, including wheat for delivery in 2007-08 and 2008-09. The sales surpassed trade expectations of 700,000 tonnes to 1.4 million tonnes.

 

Export sales for delivery in 2007-08 were 1.51 million tonnes, 5% over the previous week and 10% above the prior four-week average. Major buyers included Iraq, which took 700,000 tonnes, Algeria, which bought 148,600 tonnes, and Japan, which bought 115,000 tonnes.

 

Sales for delivery in 2008-09 were 49,800 tonnes, according to the USDA. Sales of 50,000 tonnes to Algeria were partially offset by a 200 tonne decrease to Nigeria.

 

In other bullish fundamental news, wheat stocks held in storage facilities operated by Australia's major bulk grain handling companies and traders fell 20% on month in August to 2.8 million metric tonnes, according to the Australian Bureau of Statistics. Stocks of winter grains and oilseeds typically rise during the annual harvest October through December then decline steadily through the year on the back of exports and domestic use.

 

Australia's wheat fields have suffered from extreme dryness recently, and there are fears production may tumble to 12 million tonnes or lower, an analyst said. The Australian Bureau of Agricultural & Resource Economics last week pegged the crop at 15.5 million tonnes.

 

The DTN Meteorlogix forecast for Australia calls for light showers in Victoria from Thursday to Saturday, but then mostly dry conditions for most of next week. Rain is needed through all major growing areas to prevent further declines in yield potential for reproductive to filling wheat, the private weather firm said.

 

In Argentina, mostly dry conditions will continue through Monday, Meteorlogix said. Scattered showers are possible during the middle of next week and should help maintain favorable conditions for developing wheat, according to the firm.

 

In the U.S. central and southern Plains, above normal temperatures and below normal rainfall during the next seven days will diminish soil moisture for planting, emergence and development of wheat, Meteorlogix said. However, "overall conditions at this time are favorable," the firm said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above resistance at US$9.50, a technical analyst said. The next downside price objective for the bears is closing prices below support at US$8.60. First resistance is seen at US$9.25 and then at US$9.25. First support lies at US$9.07 and then at US$9.00.

 

At the Kansas City Board of Trade, bulls have strong upside technical power and their next upside price objective is closing December wheat above resistance at US$9.25, the technical analyst said. The bears' next downside objective is closing prices below solid support at US$8.60. First resistance is seen at Wednesday's contract high of US$9.03 1/4 and then at US$9.10. First support is seen at US$8.87 and then at US$8.80.