November 6, 2007

 

US Wheat Outlook on Tuesday: Up 7-10 cents on spillover, Pakistan, Ukraine

 

 

U.S. wheat futures are expected to start Tuesday's day session higher on spillover strength from firmer outside markets, with support from a Pakistani tender and news that Ukraine will extend its ban on grain exports, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 7 to 10 cents per bushel higher. In e-cbot overnight trading, CBOT December wheat rallied 10 1/4 cents to US$7.95 1/4.

 

Outside markets, including crude oil, gold and silver, are solidly higher and should provide carryover support to the grains, an analyst said. The U.S. dollar also is slumping, which is considered bullish as it gives foreign importers more buying power.

 

State-run Trading Corp. of Pakistan issued a tender to import 300,000 metric tonnes of milling wheat for shipment between December and January, with bids to be submitted Nov. 14. Pakistan probably won't buy U.S. wheat due to sky-high freight rates, said Vic Lespinasse, analyst for Illinois Grain.

 

However, the tender is still supportive because it is for nearby delivery, Lespinasse said. That takes wheat off the world market in the near-term, when supplies are still tight.

 

In other export news, Japan said it was seeking 140,000 metric tonnes of wheat, including 75,000 tonnes from the U.S., in a routine tender to be concluded Thursday. The entire shipment is expected to arrive in Japan from Dec. 1 to Jan. 31.

 

Ukraine, meanwhile, said it would extend its ban on grain exports until Dec. 31. The government previously said the ban would end Nov. 1.

 

The ban was imposed to maintain sufficient grain reserves on the domestic market after Ukraine's grain harvest this year fell to just over 30 million tonnes from 34.3 million tonnes in 2006 and 38 million tonnes in 2005. The country suffered from drought during the growing period.

 

In the U.S., more rain is still needed for favorable development of hard red winter wheat through southwest growing areas of the central and southern Plains, DTN Meteorlogix said. Dryness in the area is lowering quality ratings for the crop, analysts said.

 

The U.S. Department of Agriculture reported that 53% of the winter wheat crop was in good-to-excellent condition as of Sunday, down two percentage points from the previous week's 55% rating. Thirty-four percent of the crop was rated in fair condition, with 13% seen in poor-to-very poor condition.

 

In Kansas, 55% of the crop was rated in good-to-excellent condition, down seven percentage points from a week earlier. In Texas, 23% of the crop was rated in good-to-excellent condition, down six percentage points from the previous week.

 

Ratings were much better in soft red winter wheat states, such as Ohio and Indiana. The weather should be mostly favorable weather for

 

The bulls' next upside price objective is to push and close CBOT December wheat above major psychological resistance at US$8.00, the 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 Monday's high of US$7.92 and then at US$8.00. First support lies at Monday's low of US$7.70 1/2 and then at US$7.60.

 

At the Kansas City Board of Trade, bulls' next upside price objective is pushing and closing December wheat above solid resistance at US$8.40. The bears' next downside objective is closing prices below solid technical support at Monday's low of US$8.00. First resistance is seen at Monday's high of US$8.20 1/2 and then at US$8.30. First support is seen at Monday's low of US$8.00 and then at US$7.90.