October 30, 2007

 

US Wheat Outlook on Tuesday: 10-15 cents lower on profit-taking retreat

 

 

Profit-taking is expected to drive U.S. wheat futures lower at the start of Tuesday's day session after a sharp rally Monday, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 10 to 15 cents per bushel lower. In e-cbot overnight trading, CBOT December wheat tumbled 15 3/4 cents to US$8.12 3/4.

 

The markets are due for a retreat after prices climbed Monday on chatter that several countries would issue tenders to buy wheat, traders said. There are ideas the gains were overdone amid support from a weaker U.S. dollar and surging outside markets, they said.

 

The U.S. dollar bounced overnight, which is seen as bearish for U.S. commodities, an analyst said. A weaker dollar gives foreign importers more buying power.

 

The Australian Bureau of Agricultural & Resource Economics, or ABARE, overnight issued an updated wheat production forecast of 12.1 million metric tonnes, down from its September estimate of 15.5 million tonnes. The projection was within trade estimates and should not offer the markets any support, a CBOT floor trader said.

 

"ABARE released a 2007 Aussie wheat crop estimate that was right in line with trade expectations," AgResource Company said in a market comment. "The market has been trading a 12 MMTs Aussie wheat crop for some time."

 

The lowered production forecast came amid news of a sharp contraction in grain stocks held by storage facilities operated by major bulk grain handling companies and traders. Wheat stocks held in storage facilities operated by Australia's major bulk grain handling companies and traders fell 39% on month in September to 1.7 million metric tonnes, the Australian Bureau of Statistics said.

 

In export news, India plans to import around 1 million metric tonnes of wheat to beef up its buffer stocks, a senior government official said. The wheat will be imported from December to March 2008, another official said.

 

India previously announced a plan to import 5 million tonnes for 2007 but so far has contracted purchases for just 1.306 million tonnes. The U.S. is not expected to make any sales to India due to disagreements over phytosanitary requirements, and the business should go to Russia or the EU, traders said.

 

Turkey's State Grain Board plans to issue a tender to purchase 300,000 metric tonnes of milling wheat, according to a report. In September, the Turkish government mandated TMO to import 800,000 tonnes of wheat by the end of May.

 

Turkey will likely buy wheat from Russia or the Black Sea region, a CBOT floor trader said.

 

Japan, meanwhile, said it would not hold a routine wheat purchasing tender this week. The next tender is likely to be held Nov. 6.

 

Despite Monday's rally, a steep four-week-old downtrend line is still in place on the daily bar chart for CBOT December wheat, a technical analyst said. A bearish head-and-shoulders top pattern is also seen on the daily chart, he said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above solid resistance at US$8.41, which would fill on the upside last week's downside price gap on the daily bar chart, the analyst said. 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 Monday's high of US$8.30 and then at US$8.41. First support lies at Monday's low of US$8.12 and then at US$8.00.

 

At the Kansas City Board of Trade, bulls' next upside price objective is pushing and prices above solid resistance at US$8.58, which would fill on the upside last week's downside price gap on the daily bar chart, the technical analyst said. Bulls almost filled that gap Monday. The bears' next downside objective is closing prices below solid technical support at last week's low of US$8.15, he said.

 

First resistance is seen at US$8.58 and then at US$8.70. First support is seen at Monday's low of US$8.38 and then at US$8.33.

 

The U.S. Department of Agriculture's weekly crop progress report said 55% of the winter wheat crop was rated in good-to-excellent condition as of Oct. 28, down from last year's rating of 60%. Twelve percent of the crop was rated in poor-to-very poor condition, and 33% of the crop was rated in fair condition.

 

The USDA said 88% of the winter wheat crop was planted, down from 90% last year and the five-year average of 90%. The USDA reported that 70% of the winter wheat crop has emerged, just below the 71% in 2006 and the average of 64%.

 

More rain is still needed through southwest growing areas of the central and southern U.S. Plains for favorable development of wheat, DTN Meteorlogix said.