October 19, 2007

 

US Wheat Outlook on Friday: Up 10-12 cents on overnight, demand ideas

 

 

U.S. wheat futures are expected to start Friday's day session higher on firmer overnight trade and ideas that U.S. wheat is becoming more competitive on the world market, analysts said.

 

Benchmark Chicago Board of Trade December wheat is called to open 10 to 12 cents per bushel higher. In e-CBOT overnight trading, CBOT December wheat climbed 13 1/4 cents to US$8.38 3/4.

 

It seems as though U.S. wheat is more competitive on the export market after recent pullbacks, an analyst said. Weakness in the U.S. dollar and a sale of 70,000 tonnes of U.S. wheat to Egypt on Thursday are seen as signs that export business may remain strong, he said.

 

There is also some market chatter about the possibility that Russia will increase its export duty on wheat to 30%, which would further restrict its grain exports, a CBOT floor trader said. Russia had already approved a 10% duty on wheat exports to take effect next month, and a higher tariff may send more business to the U.S., he said.

 

Position-squaring before the weekend may be another supportive factor for wheat futures, a CBOT floor analyst said. Wheat has room to bounce after sharp setbacks early in the week, he said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above technical resistance at US$8.50. The next downside price objective for the bears is pushing and closing prices below major psychological support at US$8.00. First resistance is seen at Thursday's high of US$8.32 and then at US$8.41. First support lies at Thursday's low of US$8.21 and then at this week's low of US$8.10.

 

It was disappointing to some traders that CBOT December wheat only rose 5 cents Thursday amid the sale to Egypt, strength in crude oil and weakness greenback.

 

"Some fresh U.S. export sales of wheat and stronger 'outside markets' could only rally wheat a nickel," a technical analyst said. "Bulls are still in trouble."

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing December wheat above resistance at US$8.60. The bears' next downside objective is pushing prices below support at this week's low of US$8.25. First resistance is seen at this week's high of US$8.43 and then at US$8.50. First support is seen at Thursday's low of US$8.33 1/2 and then at this week's low of US$8.25.

 

Turning to the weather, shower activity in the U.S. central and southern Plains will maintain soil moisture for early growth of wheat, DTN Meteorlogix said. However, the southwest growing belt continues to be on the lower end of the rainfall forecasts, the private weather firm said.

 

Drier and warmer weather is expected for the eastern Ukraine and southern Russia during the next five to seven days. The conditions will favor field work but will also reduce soil moisture for winter grains, Meteorlogix said.