October 22, 2007

 

US Wheat Outlook on Monday: 10-15 cents lower amid profit-taking pullback

 

 

Profit-taking and a rebound in the U.S. dollar are expected to drive U.S. wheat futures 10 to 15 cents per bushel lower at the start of Monday's day session, analysts said.

 

In e-cbot overnight trading, Chicago Board of Trade December wheat fell 15 cents to US$8.40 1/2.

 

Nearby wheat futures at all three U.S. exchanges on Friday closed limit up, 30 cents higher. There are some ideas the gains were overdone and that traders will take profits amid a lack of fresh bullish news, an analyst said.

 

A rebound in the greenback is bearish for U.S. commodities because it gives foreign importers less buying power, traders said. A three-week-old downtrend line is also still in place on the daily bar chart, a technical analyst said.

 

"The bulls would regain upside technical momentum with strong follow-through buying on Monday," the technical analyst said.

 

The long-term outlook for wheat is bearish, as recent rallies to all-time highs are expected to expand global plantings, analysts said. However, in the near-term, the markets still have room for a technical bounce after pulling back sharply from record prices, a trader said.

 

CBOT December wheat, for example, has fallen more than a dollar from its high of US$9.61 3/4, set on Sept. 28.

 

The bulls' next upside price objective is to push and close CBOT December wheat above technical resistance at US$8.83, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at last week's low of US$8.10. First resistance is seen at US$8.60 and then at US$8.65. First support lies at US$8.50 and then at US$8.41.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing December wheat above resistance at US$8.86 1/4, the analyst said. The bears' next downside objective is pushing prices below support at last week's low of US$8.25. First resistance is seen at US$8.75 and then at US$8.86 1/4. First support is seen at US$8.60 and then at US$8.50.

 

More rain is needed for favorable pre-winter development of hard red winter wheat, traded at the KCBT, through southwest growing areas of the U.S. central and southern Plains, DTN Meteorlogix said in a forecast.

 

Wet weather from southeast Europe to western Ukraine, meanwhile, should favor growth of winter wheat, Meteorlogix said. More rain is still needed for wheat areas in eastern Ukraine and southern Russia, the private weather firm said.

 

Argentine farmers began to harvest the first fields of new wheat crop this week, the Buenos Aires Cereals Exchange said in its weekly crop report. To date, 1% of the 2007-08 crop has been harvested, 3.7 percentage points behind the pace at this time last year. An unusually cold winter slowed development of this year's crop, the exchange said.

 

According to the exchange, 74% of Argentina's wheat crop is in good or very good condition, up from 72% last week. About 19% is in average condition, 6% is in poor condition and 1% is in very poor condition.

 

In China, wheat prices were stable in the week to Monday, supported by slower selling progress as farmers were busy with the autumn sowing. Rains had previously delayed winter wheat sowing.

 

China will sell 200,000 tonnes of imported wheat from state reserves in an auction Thursday, according to the China National Grain & Oil Trade Center. The government last month said it will hold auctions of imported wheat once or twice a month to meet domestic demand.