November 1, 2007

 

US Wheat Outlook Thursday: Weak export sales temper follow-through

 

 

Overnight gains are expected to support U.S. wheat futures at the start of Thursday's day session, but weak weekly export sales will temper any follow-through buying, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 2 to 7 cents per bushel higher. In e-cbot overnight trading CBOT December wheat climbed 12 1/4 cents to US$8.20 1/4.

 

The U.S. Department of Agriculture said export sales for the week ended Oct. 25 were 180,200 metric tonnes, a marketing-year low and well below trade expectations of 600,000 tonnes to 900,000 tonnes. The sales were 67% below the previous week and 82% below the prior four-week average, the USDA said.

 

It looks as though countries covered their wheat needs with purchases earlier in the year, a CBOT floor trader said. The weak sales should keep a lid on any follow-through buying, he said.

 

There could also be some technical pressure on wheat as bears have some near-term technical momentum on their side, a technical analyst said. It was a "bearish clue" that prices faded Wednesday even though CBOT corn and soybeans were higher and outside markets were stronger, 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 technical analyst said. The next downside price objective for the bears is pushing and closing prices below major psychological support at US$8.00 a bushel.

 

First resistance is seen at Wednesday's high of US$8.24 and then at this week's high of US$8.30. First support lies at Wednesday's low of US$8.05 and then at US$8.00.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing and closing 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 analyst said. The bears' next downside objective is closing prices below solid technical support at last week's low of US$8.15.

 

First resistance is seen at Wednesday's high of US$8.44 and then at US$8.50. First support is seen at Wednesday's low of US$8.28 and then at US$8.25.

 

Looking at the weather, more rain is still needed for favorable development of winter wheat through southwest growing areas of the U.S. Plains, according to DTN Meteorlogix. Rainfall across Italy and the western Balkan states, meanwhile, will favor winter wheat growth, the weather firm said.

 

In Australia, widespread rain or thunderstorms are expected through eastern crop areas during the next 24-48 hours, followed by 1-3 cool and damp days. Rain is unfavorable for maturing wheat and may delay the harvest of wheat, the weather firm said.

 

Australian wheat growers have demonstrated strong support for AWB Ltd.'s collective export sales pool by committing 1.8 million metric tonnes just as the annual harvest is gathering pace, the company said. AWB offered a pre-harvest incentive payment of AUS$10 a tonne to growers who commit their wheat to AWB's pool, on top of the already historically high estimated returns for sales.