October 31, 2006

 

US Wheat Outlook on Tuesday: 4-6 cents lower on bearish momentum

 

 

U.S. wheat futures are expected to start Tuesday's day session lower on bearish momentum from weaker overnight trading and a weaker close Monday.

 

There also will likely be end-of-the-month positioning pressure, a CBOT floor source said.

 

Benchmark Chicago Board of Trade December wheat is called to open 4-6 cents per bushel weaker.

 

In e-cbot overnight trade, December wheat was down 6 cents to US$4.95.

 

"The market's been acting tired," the CBOT floor source said.

 

CBOT December wheat prices Monday closed near the session low, and hit a fresh three-week low during the session. A technical analyst said the activity encourages the bears a bit, technically.

 

A bearish descending triangle pattern has formed on the daily bar chart, he said.

 

The bulls' next upside price objective is to produce a close above strong resistance at US$5.25 a bushel. The next downside price objective for the bears is closing prices below solid support at US$5.00 a bushel, the analyst said.

 

First resistance is seen at Monday's high of US$5.10 and then at US$5.16. First support lies at Monday's low of US$4.97 1/2 and then at US$4.90, he said.

 

The CBOT floor source noted there was not much supportive news to boost wheat prices. He said trading would likely be technically-based during the day session.

 

In the news, Ukraine has resumed its wheat exports, and at least 79,000 metric tonnes are expected to be delivered to India's state-owned PEC Ltd. in November. Exports had been halted temporarily when the Ukrainian government didn't issue any export licenses for a few days after they were first required.

 

In the event of a delay in wheat imports from Ukraine, some traders speculated that suppliers would arrange for wheat shipments from alternative origins.

 

Ukraine has recently seen dry weather, although rainfall last week and during the weekend has helped improve soil moisture for developing wheat, according to DTN Meteorlogix, a private weather firm. Meteorlogix said colder weather and some rain or snow in the Ukraine may cause field work delays during the coming week, especially in the east.

 

In China, where wheat-growing areas also have been dry, rainfall isn't expected in the near future, Meteorlogix said.

 

China's Zhengzhou Grain Wholesale Market will auction 354,000 metric tonnes of imported wheat from state reserves Tuesday. The Chinese have imported less wheat this crop year than last because of high prices.

 

Analysts said the auction is an effort to fill a local shortage of high-quality imported wheat.

 

Elsewhere, Meteorlogix said Australia still needs more rain.

 

Argentina, meanwhile, will see widespread moisture this weekend, the firm said.

 

As for the U.S. Southern Plains, last week's precipitation has improved conditions across Kansas and Colorado. More rain is still needed, however, especially in Oklahoma.

 

The CBOT floor trader said weather conditions would take a backseat to overnight momentum and end-of-the-month pressure.

 

In other news, Japan is seeking 60,000 metric tonnes of wheat in a routine tender to be concluded Thursday. The tender includes 20,000 tonnes of U.S. western white wheat, 20,000 tonnes of U.S. hard red winter wheat, and 20,000 tonnes of Australian standard white wheat.