November 7, 2007

 

US Wheat Outlook on Wednesday: Up 7-10 cents on outside markets, weak dollar

 

 

An ongoing rally in outside markets and weakness in the U.S. dollar are expected to pull U.S. wheat futures higher at the start of Wednesday's day session, 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 climbed 9 1/4 cents to US$8.06 1/4.

 

Activity in crude oil, gold and silver has dominated moves in the grain markets in recent sessions, and strength in the outside markets should continue to pull wheat skyward, traders said. A softer greenback is also bullish for wheat as it makes U.S. commodities more attractive to foreign buyers, they said.

 

"The dollar's getting whacked," a CBOT floor trader said.

 

An increase in Argentina's wheat export tax to 28% from 20% should provide some further support for prices, a CBOT floor trader said. However, the adjustment may not make much of an immediate impact because Argentina's registry for new wheat exports remains closed, he said.

 

Rainfall in Argentina during the next few days will favor growth of winter and spring crops, DTN Meteorlogix said in a forecast. A new cold air mass for the coming weekend bears watching as it could get fairly cool through southern wheat areas, the weather firm said.

 

Widespread rain and thunderstorms through central and eastern Australia crop areas are seen during the weekend, Meteorlogix said. Rain in the east is unfavorable for maturing wheat and may delay the harvest, according to the firm.

 

In central and southeast Australia, rain may favor any late-filling wheat. However, the precipitation is probably too late to significantly change crop production forecasts, Meteorlogix said.

 

In the U.S., weather this week looks mostly favorable weather for developing wheat in the Midwest and Delta, Meteorlogix said. More rain is still needed for favorable development of wheat through southwest growing areas of the U.S. central and southern Plains.

 

A short-term technical downtrend in still in place for wheat, but it seems as though momentum is turning toward the upside now that the markets have closed higher for three consecutive day sessions, a CBOT floor trader said. E.U. wheat futures rose on overnight strength at the CBOT, with support from a lack of farmer selling, a broker said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at US$8.30, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at this week's low of US$7.70 1/2.

 

First resistance is seen at Tuesday's high of US$8.03 1/2 and then at US$8.10. First support lies at Tuesday's low of US$7.95 and then at US$7.85.

 

The Goldman roll is expected to start Wednesday, with December contracts rolling into March, a CBOT trader said.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing and closing December wheat above solid resistance at US$8.40, the analyst said. The bears' next downside objective is closing prices below solid technical support at this week's low of US$8.00.

 

First resistance is seen at Tuesday's high of US$8.28 and then at US$8.35. First support is seen at Tuesday's low of US$8.20 and then at US$8.15.

 

In other news, Iraq is planning to increase its hard wheat production to 2.1 million metric tonnes year by the end of 2012 from a current average of 700,000 tonnes a year, a new Iraqi agriculture development plan stated. Iraq currently imports around 3.8 million tonnes of hard wheat a year.

 

The China National Grain and Oils Information Center, meanwhile, pegged the country's wheat output at 106 million tonnes, down 1 million tonnes from its estimate last month.