November 8, 2006

 

US Wheat Outlook on Wednesday: 3-5 cents higher on overnight, corn strength

 

 

U.S. wheat futures are expected to start Wednesday's day session firmer on higher overnight trade and with spillover support from corn, sources said.

 

Benchmark Chicago Board of Trade December wheat is called to open 3-5 cents per bushel firmer.

 

In e-cbot overnight trade, December wheat was up 6 3/4 cents to US$5.03 3/4 per bushel.

 

Corn was the catalyst for wheat's overnight gains and will likely support prices during the day session, a CBOT floor trader said.

 

"The whole world's been taking a breather from wheat," the trader said. "Corn is on fire right now."

 

Trading is expected to be choppy in anticipation of the U.S. Department of Agriculture's crop production and supply/demand reports due out Thursday.

 

CBOT December wheat prices closed modestly lower Tuesday in more subdued trading. A CBOT floor source said volumes have been "tepid" lately and fresh export demand is needed to sustain a new price rally.

 

Analysts have said they expect the USDA to increase U.S. 2006-07 wheat ending stocks Thursday because of weak export demand. The average expectation for U.S. wheat ending stocks is 426 million bushels, according to a Dow Jones Newswires survey of 11 analysts.

 

In October, USDA pegged ending stocks at 418 million bushels.

 

A technical analyst agreed traders are waiting to see Thursday morning's USDA monthly supply/demand report. He said there has been a recent "collapse in volatility" in the wheat market that indicates a bigger price move is on the horizon.

 

The downtrend from the October high remains intact, the analyst said. The next downside price objective for the bears is closing prices below support at last week's low of US$4.78 a bushel. The bulls' next upside price objective is to close prices above solid resistance at US$5.10 a bushel, he said.

 

First resistance is seen at this week's high of US$5.01 and then at US$5.05. First support lies at Tuesday's low of US$4.93 1/2 and then at 4.90, he said.

 

Looking at the weather, Australia, which suffered from a severe drought during the growing season, is now seeing heavy rains that are delaying the harvest, according to agricultural weather forecasts.

 

DTN Meteorlogix said there was isolated activity in eastern Australia Tuesday and a chance for a few more showers in the east Wednesday. Scattered showers are predicted in the southeast areas during the weekend, the private weather firm said.

 

More rain is needed, meanwhile, in the U.S. Southern Plains, particularly in Oklahoma and Texas, Meteorlogix said. The firm said there does not appear to be a significant chance of precipitation in the area during the next 10 days.

 

In China, drought conditions that have damaged crops in one key wheat-growing province are expected to continue, Meteorlogix said.

 

Still, the CBOT floor trader said prices would not likely be affected by the weather.

 

"It's all about money flows," he said.

 

In other news, India's government-owned trading house said Tuesday it hadn't received sale offers from any company for a tender it issued to import between 25,000-30,000 metric tonnes of wheat. International prices have shot up in the past few months with support from strong Indian demand, Australia's drought and export licensing in Ukraine.

 

India is predicting a record wheat output in 2007, and an official said the country hopes to avoid importing any wheat.