October 25, 2007

 

US Wheat Outlook on Thursday: Down again on Bearish technical momentum

 

 

Follow-through selling and bearish technical momentum are expected to push U.S. wheat futures deep into negative territory at the start of Thursday's day session, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 10-15 cents per bushel lower. In e-cbot overnight trading, CBOT December wheat closed down 15 cents at US$7.96.

 

Carryover selling should weigh on prices after nearby U.S. wheat futures closed limit down, 30 cents lower, at all three exchanges Wednesday, a CBOT floor trader said. CBOT December wheat also closed limit down Tuesday and could potentially fall the daily, exchange-imposed maximum again, he said.

 

The technical picture for wheat is becoming "increasingly bearish," with the markets continuing to retrace gains set earlier this summer as prices climbed to all-time highs, an analyst said. The path of least resistance is lower, he said.

 

There was little bullish news out overnight, traders said. The U.S. Department of Agriculture reported weekly export sales, for delivery in 2007-08 and 2008-09, were a disappointing 602,800 metric tonnes, below trade estimates of 700,000 tonnes to 1.15 million tonnes.

 

Net sales of 556,300 metric tonnes for delivery in 2007-08 were 44% below the previous week and 56% under the prior four-week average, the USDA said. Top buyers included Nigeria, which took 99,700 tonnes, and the Philippines, which bought 99,000 tonnes.

 

Net sales of 46,500 metric tonnes for delivery in 2008-09 were for the Philippines, which bought 34,500 tonnes, and Nigeria, which bought 12,000 tonnes.

 

Japan, meanwhile, said it bought 20,000 metric tonnes of Australian wheat in a routine tender concluded Thursday.

 

Adding to the bearish tone for U.S. markets, French wheat futures are weaker. Liffe's Paris-based milling wheat at one point fell to two-month lows in reaction to the sharp drops in CBOT wheat futures over past two days, a trader said.

 

A close for CBOT December wheat below the previous reaction low crossing at US$8.10 would renew a decline off September's high, while opening the door for a possible test of the 38% retracement level of this year's rally crossing at US$7.68 1/2, a technical analyst said. A closes above the 20-day moving average of US$8.72 3/4 would signal that a short-term low has been posted, he said.

 

At the Kansas City Board of Trade, a close for December wheat below the previous reaction low crossing at US$8.25 would renew the decline off October's high, while opening the door for a possible test of the reaction low crossing at US$8.06 later this fall, the technical analyst said. A closes above an Oct. 8 gap crossing at US$8.94 is needed to help confirm a short-term low has been posted, he said.

 

In other news, there is a chance Australian wheat in some areas could be hit by unfavorable rain at harvest time, the government's Bureau of Meteorology reported. Crop lands in southern Queensland and central and northern New South Wales face a moderate to strong chance of above average rainfall November through January, the bureau said.

 

Late sown wheat crops in Queensland likely won't be harvested for some weeks. Ongoing rainfall on mature wheat crops ready for harvest can spoil seed and cause it to sprout, making it unusable for milling purposes and only suitable for feeding to animals.

 

A wetter season is also favored in southwest Western Australia, although it's generally a dry time of year in this part of the country, the bureau said in a monthly 3-month rainfall outlook statement. Harvest has also begun in Western Australia and usually is completed by year end.