October 5, 2007

 

US Wheat Outlook on Friday: 1-3 cents down on profit-taking, lack of news

 

 

Overnight declines and a lack of fresh, bullish inputs are expected to keep U.S. wheat futures on the defensive at the start of Friday's day session, analysts said.

 

Benchmark Chicago Board of Trade December wheat is called to open 1-3 cents per bushel lower. In e-cbot overnight trading, CBOT December wheat ended down 2 cents at US$9.04.

 

Profit-taking will likely pressure the markets going into the weekend, traders said. Prices are already at elevated levels, so there is room to pull back, they said.

 

Nearby U.S. wheat futures slumped Thursday, and another big down day Friday would provide the bears with fresh downside technical momentum, a technical analyst said. The U.S. Department of Agriculture announced a sale of 200,000 metric tonnes of U.S. hard red winter wheat to Algeria for delivery in 2008-09, and that should offer some support, traders said.

 

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, he said. The next downside price objective for the bears is pushing prices below support at US$9.00 a bushel. First resistance is seen at US$9.20 and then at Thursday's high of US$9.38. First support lies at US$9.00 and then at US$8.80.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing prices above resistance at the contract high of US$9.50 1/2, the analyst said. The bears' next downside objective is pushing prices below solid support at this week's low of US$9.00. First resistance is seen at US$9.20 and then at Thursday's high of US$9.39 and then at the contract high of US$9.50 1/2. First support is seen at Thursday's low of US$9.06 and then at US$9.00.

 

Uncertainty about the size of Australia's crop continues to offer some underlying support to the markets, although the trade has already factored in significant losses due to drought, an analyst said. ABN Amro analyst Belinda Morgan downgraded its forecast for national new crop wheat production to 12 million tonnes, below the Australian Bureau of Agricultural & Resource Economics' September forecast of 15.5 million tonnes.

 

Poor seasonal conditions have downgraded the wheat crop in Western Australia to 4.9 million metric tonnes, about 50% of long-term average output, according to a new report from the state's Department of Agriculture and Food.

 

There looks to be a chance for showers in the West Australia wheat belt early next week, according to DTN Meteorlogix. This may help ease stress to this portion of the crop but it is unlikely to significantly affect crop production forecasts, the firm said.

 

Showers may also develop in Australia's northeast crop areas next week, Meteorlogix said. The portion of the crop is already filling and would benefit only slightly from any increase in rainfall, the firm said.

 

In Argentina, conditions are expected to be drier and somewhat cooler through the southern winter wheat belt, Meteorlogix said.

 

In the U.S. central and southern Plains, thunderstorms later this weekend and early next week will provide beneficial moisture for early growth of wheat. Moisture may hit the drier areas of southwest Kansas, but that part of the forecast is more uncertain, the firm said.

 

In other news, South Korea's Samyang Milmax Corp., a flour milling company, said it bought 22,000 tonnes of U.S. No. 1 wheat in a tender but would not disclose how much it paid. The wheat will be delivered to South Korea between Dec. 5 and Jan. 5.

 

An ethanol plant will be built in Unity, Saskatchewan, according to a news release. The state-of-the-art CUS$38 million plant, which will use roughly 68,000 tonnes of wheat per year, with about 95% coming from local suppliers, is expected to begin production in September 2008.