October 9, 2007

 

US Wheat Outlook on Tuesday: Mixed start in partial recovery

 

 

U.S. wheat futures are expected to start Tuesday's day session mixed in a partial recovery to Monday's steep losses, analysts said.

 

In e-cbot overnight trading, nearby Chicago Board of Trade December wheat settled 3 1/2 cents lower at US$8.56 1/2 per bushel. CBOT July wheat, which represents the new crop, finished 11 cents higher at US$6.68 1/4.

 

The nearby contracts could struggle again amid follow-through liquidation from Monday as there is not much fresh news out, an analyst said. All three U.S. exchanges closed limit down Monday in the first three contract months.

 

However, CBOT and Kansas City Board of Trade July wheat should continue to feel some support from ideas that the new crop/old crop spread is too large, a CBOT floor trader said. Some traders also think that, after worldwide production problems and strong demand for U.S. wheat, the old-crop storyline can't get any more bullish, an analyst said.

 

CBOT December wheat prices Monday gapped lower on the daily bar chart and hit a fresh two-week low. Some near-term chart damage occurred, following a bearish weekly low close posted last Friday, a technical analyst said.

 

"Another big down day on Tuesday would provide the bears better downside technical momentum to suggest that a near-term market top is finally in place," he said.

 

Bulls' next upside price objective is to push CBOT December wheat above resistance at US$8.88 1/2, which is the top of Monday's downside price gap on the daily bar chart, the technical analyst said. The next downside price objective for the bears is pushing prices below solid support at US$8.30.

 

First resistance is seen at Monday's high of US$8.70 and then at US$8.88 1/2. First support lies at US$8.50 and then at US$8.39.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above resistance at US$8.94, the technical analyst said. The bears' next downside objective is pushing prices below solid support at US$8.47.

 

First resistance is seen at Monday's high of US$8.80 and then at US$8.94. First support is seen at US$8.60 and then at US$8.50.

 

News out overnight was overall unremarkable, an analyst said. Japan said it was seeking 145,000 metric tonnes of wheat in a routine tender to be concluded Thursday.

 

The Russian cabinet of ministers decided to approve a seasonal export duty on wheat, the government press service said. The exact figure and the duration of the duty have not yet been formally announced, according to the press service, but officials said earlier it would be 10%.

 

The trade has already talked about and factored in any effect from Russia's export tax, a CBOT floor broker said.

 

Russia exported 6.06 million metric tonnes of wheat in January-August, 20.5% more than a year earlier, according to the Federal Customs Service reported. The exported wheat was worth US$1.238 billion, compared to US$622.2 million a year earlier.

 

More rain is needed in southern Russia and south and east Ukraine to improve prospects for winter wheat, DTN Meteorlogix said. There is some chance for moisture later in the near term, along with much cooler weather, the private weather firm said.

 

Recent rain and showers through the North China plain will help improve soil moisture and irrigation for winter wheat, Meteorlogix said. However, field work and planting delays are likely, the firm said.

 

In Australia, showers, up to 0.60 inch, were reported in some wheat areas of the west and northeast, but more rain is needed following weeks of drought. Queensland may see additional significant shower activity during the coming days, but little is expected otherwise, Meteorlogix said.

 

In the U.S. central and southern Plains, conditions are favorable for winter wheat planting. Some areas could use more rain, but most have adequate soil moisture, Meteorlogix said.