November 1, 2006

 

US Wheat Outlook on Wednesday: 2-3 cents firmer on overnight, Egypt business

 

 

U.S. wheat futures are expected to start Wednesday's day session modestly higher with support from firmer overnight trading and news of Egyptian wheat business, sources said.

 

Benchmark Chicago Board of Trade December wheat is called to open 2-3 cents per bushel firmer.

 

In e-cbot overnight trade, December wheat was 3 1/4 cents higher at US$4.86 1/4.

 

U.S. wheat futures closed sharply lower Tuesday with end-of-the-month profit-taking helping to drive prices down.

 

"It looks like we're rebounding a little bit trying to stabilize," one CBOT floor source said.

 

Egypt's state-owned General Authority For Supply Commodities said Wednesday it bought 60,000 metric tonnes of U.S. soft white wheat and 150,000 tonnes of Russian wheat for shipment Dec. 11-20. GASC last bought wheat Oct. 27 when it purchased 180,000 tonnes of Russian and U.S. wheat for shipment Dec. 1-15.

 

The tender helped boost prices overnight, sources said, although the business may not be enough to support prices throughout the day session, a CBOT trader said. He said to expect two-sided trading, underpinned by bullish global supply concerns and bearish weak export figures.

 

"There's still so much volatility," he said.

 

A technical analyst said price action Tuesday in CBOT December wheat trading saw a bearish downside breakout from a descending triangle pattern on the daily bar chart. Bears gained some fresh near-term downside technical momentum, he said.

 

The CBOT trader added there was some technical damage to the charts as prices closed below key moving averages.

 

The next downside price objective for the bears is closing prices below support at US$4.65 a bushel, the analyst said. Bulls' next upside price objective is to produce a close above strong resistance at US$5.00 a bushel.

 

First resistance is seen at US$4.90 and then at Tuesday's high of US$4.94 1/2. First support lies at Tuesday's low of US$4.82 and then at US$4.80, the analyst said.

 

On the weather watch, the U.S. Southern Plains still need rain to ensure favorable germination and early development of wheat, especially in Oklahoma and Texas, DTN Meteorlogix said. The weather firm said it is "very uncertain" whether showers will return to the region next week.

 

In the Ukraine, cold and unsettled weather is expected during the next five days, Meteorlogix said. Heavy precipitation in the east may slow field work, planting activities and development of the wheat crop, the firm said.

 

Ukraine has raised its forecast for wheat exports in the 2006-07 marketing year to 3.2-3.3 million tonnes. Exports are still estimated below last marketing year, when Ukraine sold 6.5 million tonnes of wheat, officials said.

 

Argentine wheat fields, meanwhile, will see some shower activity, Meteorlogix said.

 

China is expected to stay dry.

 

China's Zhengzhou Grain Wholesale Market said it had sold around 308,000 metric tonnes of imported wheat in an auction, or almost 90% of what it planned to sell. The market said it had auctioned state reserves of wheat imported from the U.S. and Canada.

 

In a separate transaction, the Taiwan Flour Millers' Association bought 46,950 tonnes of U.S. No. 1 wheat from trading house Mitsui. The shipment is to arrive in Taiwan Dec. 5-19.