November 8, 2007

 

US Wheat Outlook on Thursday: Weak weekly export sales seen as bearish

 

 

Disappointing weekly export sales are expected to weigh on U.S. wheat futures Thursday, although the markets may feel some spillover support from firmer neighboring markets, traders said.

 

U.S. wheat futures are called to start mixed to lower, traders said. In e-cbot overnight trading benchmark Chicago Board of Trade, CBOT December wheat slipped 1/4 cent to US$7.87 1/2 per bushel.

 

Weekly wheat export sales for the week ended Nov. 1 were 14,600 metric tonnes, a marketing-year low, the U.S. Department of Agriculture said. The sales were 92% below the previous week, 98% under the prior four-week average and well below trade estimates of 200,000 tonnes to 600,000 tonnes.

 

Cancellations and buybacks were high at 301,400 tonnes. Cancellations are mounting now that futures prices have dropped sharply from highs hit this fall, analysts have said

 

North African countries are canceling purchases and may be switching orders to the Black Sea region, a CBOT trader said. Morocco canceled a purchase of 76,500 tonnes of hard red winter wheat, while Egypt canceled a purchase of 57,000 tonnes of soft red winter wheat, the USDA said.

 

The weak sales will "add fuel to the bears' fire," a CBOT floor trader said.

 

The Turkish state grain board TMO purchased 164,000 metric tonnes of milling wheat from Kazakhstan, Russia and the European Union in an import tender. The board paid between US$399 a tonne cash and freight and US$352 a tonne free on board.

 

Japan said it bought 140,000 metric tonnes of wheat, including 75,000 from the U.S., in a tender concluded Thursday. The entire shipment is expected to arrive in Japan from Dec. 1 to Jan. 31.

 

The bears still have some downside technical momentum and regained more from Wednesday losses, a technical analyst said. A five-week-old downtrend line is still in place on the daily bar chart, he said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at US$8.30, the 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 US$8.00 and then at Wednesday's high of US$8.08. First support lies at Wednesday's low of US$7.86 and then at US$7.80.

 

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 US$8.15 and then at US$8.25. First support is seen at Wednesday's low of US$8.09 and then at US$8.00.

 

Optimism In Australia

 

Some Australian farmers believe their wheat crops may have better yield prospects than previously expected, said Mike Chaseling, a director of commodities trading manager Emerald Group Australia Pty. Ltd. Optimism has surged among wheat growers in many districts in southern Australia in the wake of good rainfall in recent weeks, he said.

 

Prospects for a bigger crop are bearish, although the producers still need to get the wheat out of the ground, a CBOT trader said. Drier weather in Australia during the coming days will help to improve conditions for mature wheat and the wheat harvest, DTN Meteorlogix said.

 

Rainfall in Argentina during the next couple of days will favor growth of winter and spring crops, Meteorlogix said. A new cold air mass for this weekend bears watching as it could mean frost or light freezing conditions for the southern wheat belt, according to the weather firm.