October 2, 2007

 

US Wheat Outlook on Tuesday: Down 6-8 cents on profit-taking, overnight

 

 

Profit-taking and overnight weakness are expected to drag U.S. wheat futures 6 to 8 cents per bushel lower at the start of Tuesday's day session, analysts said.

 

In e-cbot overnight trading, Chicago Board of Trade December wheat slipped 7 cents to US$9.45 1/2.

 

Fundamental factors for wheat continue to look strong, but there is room for traders to take profits after recent rallies to all-time highs, analysts said. It seems as though the markets took a bit of a breather overnight, they said.

 

Weakness in neighboring commodity markets also was seen as bearish for wheat, traders said. However, the results of an Egyptian tender issued after the close Monday could give wheat new direction, they said.

 

Egypt's state-owned General Authority for Supply Commodities tendered to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Nov. 1-15 or Nov. 16-30, on a free-on-board basis. Egypt has been absent from the world market in recent weeks and should take much more than 55,000 to 60,000 tonnes, traders said.

 

In other export news, Japan said it was seeking 160,000 metric tonnes of wheat, including 120,000 tonnes from the U.S., in a routine tender to be concluded Thursday. The entire shipment is expected to arrive Dec. 1 to Jan. 10.

 

Japan also said it was seeking 28,800 metric tonnes of food wheat and 45,900 tonnes of barley in two simultaneous buy-sell, or SBS, tenders. Under the SBS system, the ministry floats periodic tenders that simultaneously identify the price at which the ministry can buy a product from an importer and sell the product to an end-user.

 

Four South Korean flour mills - Dongah, Daehan, Youngnam and CJ Corp - bought 25,000 metric tonnes of U.S. No.1 wheat from trading house Cargill in a tender. The shipment is expected to reach South Korea between Nov. 10 and Dec. 10.

 

Morocco's state wheat buyer said it bought 264,700 metric tonnes of optional-origin soft wheat in a tender for delivery in October. Morocco awarded licenses to traders to buy the wheat in a tender that closed Friday.

 

In other news, there does not appear to be any significant relief in sight for parched Australian wheat growing areas. Dry wheat lands across Australia received little if any rainfall in week ended Oct. 1, except for southern Victoria and southeast South Australia, which received 10-50 millimeters of moisture, according to latest data from government's Bureau of Meteorology.

 

A westerly air stream over southeast Australia is expected to increase to gale force strength early Wednesday, bureau said. The winds are expected to compound damage to crops from warm, dry weather.

 

There is a chance for showers in northern New South Wales and southern Queensland early next week, but forecasts no longer show rain in the West Australia region, DTN Meteorlogix said. Wet and cool conditions in Argentina, meanwhile, mostly favor developing winter wheat, the private weather firm said.

 

In the U.S. central and southern Plains, rainfall in the east may lead to more winter wheat planting delays, Meteorlogix said. Western areas could use more rain to favor emergence and early growth of wheat, the firm said.

 

U.S winter wheat planting was 42% complete as of Sunday, down from 49% last year and below the five-year average of 51%, according to the U.S. Department of Agriculture's weekly crop progress report. The USDA said 16% of the winter wheat crop had emerged, down from 21% last year and below the five-year average of 23%.

 

The bulls' next upside price objective is to push and close CBOT December wheat above resistance at the contract high of US$9.61 3/4, a technical analyst said. The next downside price objective for the bears is pushing prices below support at US$9.17 1/4, which would fill on the downside an upside price gap on the daily bar chart. First resistance is seen at the contract high of US$9.61 3/4 and then at US$9.70. First support lies at Monday's low of US$9.43 and then at US$9.36.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above resistance at US$10.00, the analyst said. The bears' next downside objective is pushing prices below solid support at US$9.03 1/4, which would fill on the downside an upside price gap on the daily bar chart. First resistance is seen at Monday's contract high of US$9.50 1/2 and then at US$9.60, he said. First support is seen at Monday's low of US$9.35 and then at US$9.25.