October 18, 2006

 

US Wheat Outlook on Wednesday: Prices lower to correct market

 

 

U.S. wheat futures are called to open Wednesday's day session lower on downward momentum and in a continuing correction to high prices, sources said.

 

Benchmark Chicago Board of Trade December wheat is called to open 7-10 cents per bushel lower.

 

In e-cbot overnight trade, December wheat was down 9 cents at US$5.22.

 

"We're in nosebleed area," one floor source said about prices.

 

Prices may be further pressured on news Australia, which has suffered a severe drought, received some rain overnight, sources said. Dry growing areas in Argentina also have received rain recently, and there is a perception the countries are stabilizing, sources said.

 

DTN Meteorlogix said 0.25 to 1 inch of rain is possible in Australia's New South Wales on Friday. Other wheat-growing areas will see only a few light showers, the weather firm said.

 

The firm said in Argentina the next five days will feature drier weather and the next chance for widespread shower activity early next week.

 

As for the U.S. Southern Plains, Meteorlogix said the chances for significant rainfall are mostly in the eastern belt.

 

On Tuesday, CBOT December wheat prices hit a fresh contract high of US$5.57 early on, exceeding the previous contract high of US$5.50, before falling lower.

 

A technical analyst said the volatile CBOT wheat trading signaled that a market top could be near. He added, however, that bulls are still strong.

 

The bulls' next upside price objective is to produce a close above strong resistance at Tuesday's high and the contract high of US$5.57 a bushel, the analyst said. The next downside price objective for the bears is closing prices below solid support at US$5.00 a bushel. First resistance is seen at US$5.40 and then at US$5.50. First support lies at US$5.20 and then at US$5.10.

 

In other news, the Canadian Wheat Board said it would take advantage of any increased export sales opportunities created by shortfalls from the drought-reduced Australian wheat crop. The wheat production deficit in Australia will create some opportunities for the Canadian Wheat Board to move high-grade wheat, an analyst said.

 

The Ukraine, meanwhile, said it will plant winter wheat on 5.6 million to 5.8 million hectares this year, compared with 5.3 million last year.

 

Ukraine also said it plans to impose a quota of 1.8 million metric tonnes on the export of grain in January-July 2007.

 

On Tuesday, the government imposed an export quota of 1.6 million tonnes for the remaining months of this year. Ukraine's grain harvest this year will be 34.7 million tonnes, 2.5 million tonnes smaller than in 2005, according to the government. Export of grain harvested this year has already reached 5.5 million tonnes, 600,000 tonnes more than a year ago.