October 1, 2007

 

US Wheat Outlook on Monday: Up 10-12 cents on e-CBOT, global tightness

 

 

U.S. wheat futures are expected to start Monday's day session 10-12 cents per bushel higher on firmer overnight trade and worries about dwindling global supplies, traders said.

 

In e-cbot overnight trading, Chicago Board of Trade December wheat rose 12 1/4 cents to US$9.51 1/4.

 

The U.S. Department of Agriculture on Friday trimmed its estimate for total 2007-08 U.S. wheat production and pegged quarterly wheat stocks as of Sept. 1 below a year earlier. The projections were "outright bullish" and should continue to underpin the wheat markets amid fears about tight global supplies, a CBOT floor broker said.

 

World wheat ending stocks are pegged at a three-decade low.

 

Rain is needed through all of Australia's major growing areas to prevent further declines in yield potential, DTN Meteorlogix said. A disturbance may lead to showers over the west Australia wheat belt next weekend, but there are not many other chances for rain in the region this week, the private weather firm said.

 

In Argentina, soil moisture conditions are generally favorable for developing wheat due to prior rains, Meteorlogix said. According to the Buenos Aires Exchange, 73% of the country's wheat crop is in good or very good condition, up from 68% last week. About 20% is in average condition, 6% is in poor condition and 1% is in very poor condition.

 

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

 

The USDA has, for the time being, decided not to release acreage early from a land idling program in order to spur agricultural production, Agriculture Secretary Chuck Conner said. The USDA pays farmers to keep millions of acres out of production as part of the Conservation Reserve Program.

 

Some industry members had expected the USDA to release a few million acres due to strong demand for U.S. grain, but the agency said it expected farmers to plant enough without government prodding. The news that no land will be released from the CRP right away is friendly to the wheat market, an analyst said.

 

Although wheat has a fundamentally bullish story, some profit-taking may keep the markets on the defensive because there was not much fresh news out over the weekend, an analyst said. The bulls need to be fed every day, he said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above resistance at Friday's high of US$9.61 3/4, a technical analyst said. The next downside price objective for the bears is closing prices below support at US$9.07. First resistance is seen at US$9.46 1/2 and then at US$9.50. First support lies at Friday's low of US$9.36 and then at US$9.26.

 

Non-commercial speculative funds increased long CBOT wheat futures and options positions by 1,615 contracts and cut short positions by 2,438 contracts as of Sep. 25, the Commodity Futures Trading Commission said in a supplemental report. The funds were net long 694 contracts.

 

At the KCBT, bulls still have strong upside technical power and their next upside price objective is closing prices above resistance at the contract high of US$9.49 1/2, the technical analyst said. The bears' next downside objective is closing prices below psychological support at US$9.00. First resistance is seen at Friday's contract high of US$9.49 1/2 and then at US$9.75. First support is seen at Friday's low of US$9.17 and then at US$9.10.

 

At the KCBT, speculative funds decreased longs by 1,952 contracts, increased shorts by 57 contracts and were net long 32,491 contracts, according to another CFTC supplemental report. At the MGE, speculative funds boosted longs by 624 contracts, trimmed shorts by 222 contracts and were net long 10,987 lots, the CFTC said.

 

In other news, Russia harvested to date 85 million metric tonnes of grain in bunker weight and the country's export potential in the 2007-2008 marketing year is 12 million tonnes, according to the government press service. This year's harvest was enough to meet the country's domestic grain requirement and provide the export potential of 12 million tonnes in the current marketing year, the service reported.