October 23, 2007

 

US Wheat Outlook on Tuesday: 4-6 cents higher on overnight, follow-through

 

 

U.S. wheat futures are expected to start Tuesday's day session higher on follow-through buying and with some background support from bullish demand ideas, analysts said.

 

Benchmark Chicago Board of Trade December wheat is called to open 4 to 6 cents per bushel higher. In e-cbot overnight trading, CBOT December wheat rose 6 cents to US$8.77.

 

Prices soared late in Monday's day session amid talk that Russia may hike its wheat export tariff to 50% from 10% to keep supplies on the domestic market, analysts said. The chatter encouraged speculation that the U.S. could see more export business if Russia is out of the picture, although no new details about Russia's plans have been confirmed, they said.

 

The firmer tone from Monday should carryover into Tuesday's session, traders said. Bulls also have regained fresh upside technical momentum after nearby wheat futures closed limit up, 30 cents higher, on Friday and then rose sharply Monday, a technical analyst said.

 

However, there was little fresh news out overnight, so the markets could come under pressure from some profit-taking, a CBOT floor broker said. There is talk about the potential for weakness as part of a "Turnaround Tuesday," he said.

 

Some traders also said that any bullishness about the possibility of Russia limiting exports may be tempered by ideas that neighboring Kazakhstan has extra wheat to sell. Ukraine also said it planned to liberalize export rules, although the country may not have much wheat available to export, an analyst said.

 

"Could it be a two-sided trade? Yea," a CBOT trader said. "The rest of the floor has a firmer bias, but wheat is kind of off in a world of its own."

 

CBOT corn and soybean futures also are called to open firmer following gains overnight.

 

The bulls' next upside price objective is to push and close CBOT December wheat above major psychological resistance at US$9.00, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.41. First resistance is seen at Monday's high of US$8.73 and then at US$8.83. First support lies at US$8.60 and then at US$8.50.

 

At the Kansas City Board of Trade, bulls' next upside price objective is pushing and closing December wheat above major psychological resistance at US$9.00, the analyst said. The bears' next downside objective is pushing prices below solid support at US$8.50. First resistance is seen at Monday's high of US$8.89 and then at US$9.00. First support is seen at US$8.80 and then at US$8.70.

 

In other developments, Japan said it was seeking 20,000 metric tonnes of Australian wheat in a tender to be concluded Thursday. The entire shipment is expected to arrive Dec. 10 to Jan. 15.

 

Recent rain on some wheat lands in South Australia could benefit some of the crops to be harvested late in the year in the far south and adjoining areas in Victoria state, an official for the South Australian Farmers' Federation said. The rain has come too late to benefit crops in early sown areas and in western growing areas such as on the Eyre Peninsula, where crops are already being harvested, he said.

 

In Australia, there is the chance for showers, thundershowers and some rain in New South Wales and southern Queensland during the next one to three days, DTN Meteorlogix said in a forecast. Rainfall will favor summer crops and any late filling winter wheat, but it is unfavorable for maturing wheat and could delay the wheat harvest, the weather firm said.

 

Wet weather from southeast Europe to west Ukraine should favor growth of winter wheat, Meteorlogix said. More rain is still needed for wheat areas of the east Ukraine and south Russia, the firm said.

 

In the U.S. central and southern Plains, more rain is still needed for favorable pre-winter development of wheat through southwest growing areas, Meteorlogix said. The U.S. Department of Agriculture on Monday said 82% of the winter wheat crop was planted, below the 84% seeded in 2006 and the five-year average of 84%. The USDA said 57% of the crop had emerged, below the 62% in 2006 and the average of 64%.