November 5, 2007

 

US Wheat Outlook on Monday: Down 3-5 Cents on e-CBOT; lack of export news

 

 

Lower overnight trade and a lack of export news should keep U.S. wheat futures on the defensive at the start of Monday's day session, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 3 to 5 cents per bushel lower. In e-CBOT overnight trading, CBOT December wheat fell 4 1/4 cents to US$7.74 1/4.

 

There was not much fresh, bullish news out over the weekend, and the wheat markets need to see more export demand to fight off selling pressure, an analyst said. There is some speculation India and Iraq may issue tenders later this week, traders said.

 

The U.S. Department of Agriculture is slated to release its November supply and demand report Friday, and there may be some liquidation heading into the report, an analyst said.

 

The markets also will likely feel some pressure from a stronger U.S. dollar and weakness in outside markets, including crude oil, traders said. A stronger dollar makes U.S. commodities less attractive to foreign importers.

 

In other bearish news, the Buenos Aires Cereals Exchange is now predicting Argentina will grow 15.2 million metric tonnes of wheat during the 2007-08 season, up 1 million tonnes from last season. Area planted with wheat this season was down 1.8% from last season, but good conditions this season and drought last year will result in higher yields from the new crop, the exchange said.

 

The USDA estimates Argentina's production at 14.5 million metric tonnes, down slightly from 14.6 million metric tonnes last season.

 

Argentine farm groups are warning of an inevitable default in wheat export commitments in a few days if the government doesn't open the export registry for wheat. Brazil, the primary market for Argentine wheat shipments, will be especially affected, the groups said.

 

Defaults in Argentine wheat exports would be bullish but "are probably not going to happen," a representative of one farm group said. The problem will likely be resolved through negotiations, the representative said.

 

Frost and light freezing conditions hit Argentina's southern wheat belt during the weekend and may have caused a problem for any flowering wheat, DTN Meteorlogix said. Still, the cold is not expected to be "a major concern for wheat overall," the weather firm said.

 

Weather conditions should be mostly favorable for developing soft red winter wheat in the U.S. Midwest this week, Meteorlogix said. However, next week looks to turn wetter.

 

More rain is still needed for favorable development of hard red winter wheat through southwest growing areas of the U.S. central and southern Plains, Meteorlogix said. The wetter weather pattern next week does not look to include the western plains, the firm said.

 

Concerns about dryness in the Plains are bullish but not big enough to sustain a rally on their own yet, an analyst said. Traders will be watching the USDA's weekly crop progress report, due out at 4 p.m. EST Monday, for signs of deterioration of the HRW wheat crop, he said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above major psychological resistance at US$8.00, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$7.60. First resistance is seen at Friday's high of US$7.85 1/2 and then at US$7.96. First support lies at Friday's low of US$7.74 and then at US$7.60.

 

At the Kansas City Board of Trade, bulls' next upside price objective is pushing prices above solid resistance at US$8.40, the technical analyst said. The bears' next downside objective is closing prices below solid technical support at US$7.75. First resistance is seen at Friday's high of US$8.12 and then at US$8.15. First support is seen at Friday's low of US$8.00 and then at US$7.90.