October 8, 2007

 

US Wheat Outlook on Monday: Down 9-14 cents in ongoing correction

 

 

U.S. wheat futures are expected to start Monday's day session lower in an ongoing correction to high prices and with weekend rains in Australia encouraging some bearish sentiments, analysts said.

 

Benchmark Chicago Board of Trade December wheat is called to open 9 to 14 cents per bushel lower. In e-cbot overnight trading, CBOT December wheat tumbled 13 3/4 cents to US$8.76 1/4.

 

Bears have fresh downside technical momentum after nearby wheat futures closed solidly lower Thursday and Friday, a technical analyst said. No serious near-term chart damage has occurred, but "the bulls have faded," he said.

 

Traders said they expected old crop/new crop spreading would continue to weigh on December contracts Monday at the CBOT and Kansas City Board of Trade. There are ideas that CBOT and KCBT December wheat are trading at too big of a premium to the new-crop July contracts, traders said.

 

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, the technical analyst said. The next downside price objective for the bears is pushing prices below support at US$8.50. First resistance is seen at US$9.00 and then at Friday's high of US$9.10. First support lies at Friday's low of US$8.88 1/2 and then at US$8.80.

 

At the KCBT, bulls' next upside price objective is closing prices above resistance at the contract high of US$9.50 1/2, the technical analyst said. The bears' next downside objective is pushing prices below solid support at US$8.80. First resistance is seen at US$9.00 and then at Friday's high of US$9.12. First support is seen at Friday's low of US$8.94 and then at US$8.80.

 

Some of Australia's parched wheat growing areas received moisture during the weekend, which is somewhat bearish, a CBOT floor analyst said. It is unclear how much the precipitation will help stabilize the crop, which has endured weeks of extremely dry weather, he said.

 

Showers in West Australia on Sunday and Monday shouldn't be enough to ease dryness concerns, especially since it looks drier again during the next week or more, according to DTN Meteorlogix. Showers may be more significant in parts of Queensland, but wheat in the area may be too far along to benefit from the moisture, the private weather firm said.

 

The conditions for Argentina's 2007-08 wheat crop continued to improve last week as rain fell on the young crop, the Agriculture Secretariat said in its weekly crop report Friday. In the south of Buenos Aires Province, where the wheat had been suffering from insufficient moisture, "the abundant rainfall over the past weeks has saturated the soil and produced a notably favorable change in the crop condition," the Secretariat said.

 

In the U.S. central and southern Plains, thunderstorm activity Sunday night and Monday morning will help improve soil moisture for wheat in some of the previously dry areas of southern Kansas, Meteorlogix said. The U.S. Department of Agriculture will release its weekly crop progress report Tuesday, one day later than usual due to the Columbus Day holiday.

 

In south and east Ukraine and southern Russia, shower activity Sunday and Monday will help improve soil moisture for developing winter wheat, Meteorlogix said. More rain will still be needed, especially in the south Russia area, according to the firm.

 

The Russian Trade and Economic Development Ministry has submitted a draft decree to the cabinet providing for an increase in the export duty on wheat and barley, the ministry's press office said. Officials said earlier the ministry was proposing to impose a 10% wheat export duty.

 

Ukraine exported 178,700 metric tonnes of grain from July 1, the beginning of the current marketing year, to Sept. 30, compared with 4.1 million tonnes in the corresponding period last year, the state customs authority said. The fall is the result of the virtual ban on the export of grain which is currently in effect in Ukraine, imposed by the government in order to maintain supplies to the domestic market in the face of a smaller harvest this year.

 

The latest estimate for the Czech Republic's total 2007 wheat harvest forecasts a total yield of 3.955 million metric tonnes, an increase of 12.8% compared with 3.506 million tonnes in 2006, an official said. The wheat yield is estimated at 4.88 tonnes a hectare in 2007, up 8.7% from the final wheat crop yield of 4.49 tonnes a hectare in 2006.

 

In China, wheat purchase prices were mostly stable during the week-long National Day holiday last week, but prices are likely to decline on dwindling demand, analysts said. In the week to Monday, purchase prices for white wheat in Shijiazhuang city in Hebei province were at RMB1,560 a metric tonne, stable from the pre-holiday level.