November 13, 2007

 

US Wheat Outlook on Tuesday: Lower on carryover selling, lack of news

 

 

U.S. wheat futures are poised to start Tuesday's day session lower on weaker overnight trade, technical pressure and a lack of fresh, bullish news, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 2 to 4 cents per bushel lower. In e-cbot overnight trading, CBOT December wheat slipped 2 3/4 cents to US$7.58 1/4.

 

The bears still have downside technical momentum in wheat as near-term chart damage has been inflicted recently to nearby contracts, a technical analyst said. A six-week-old downtrend line is still in place on the daily bar charts for CBOT and Kansas City Board of Trade December wheat, he said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above 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 last week's low of US$7.45.

 

First resistance is seen at Monday's high of US$7.70 and then at US$7.77 1/2. First support lies at Monday's low of US$7.49 and then at US$7.45.

 

At the KCBT, bulls' next upside price objective is pushing and closing December wheat above psychological resistance at US$8.00, he said. The bears' next downside objective is closing prices below solid technical support at last week's low of US$7.70.

 

First resistance is seen at Monday's high of US$7.88 1/2 and then at US$8.00. First support is seen at Monday's low of US$7.73 and then at US$7.70.

 

However, wheat is in an oversold condition after recent declines and may see strength from a "Turnaround Tuesday" bounce, a CBOT floor trader said. There also could be some support from tenders that are hanging over the market, he said.

 

India's state-run MMTC Ltd. has floated a wheat import tender for around 350,000 metric tonnes. The U.S. is not expected to get any the business in the tender, which closes Monday, but it could still take wheat off the world market when supplies are tight, the CBOT trader said.

 

Japan, meanwhile, said it was seeking 155,000 metric tonnes of wheat, including 90,000 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.

 

Argentina reopened its wheat registry Tuesday, which is seen as bearish for U.S. wheat futures as Argentina is expected to be a tough competitor for export business, traders said. Argentina last week said it was raising the wheat export tax to 28% from 20% but keeping the export tax on wheat flour unchanged at 10%.

 

The U.S. Department of Agriculture will release its weekly export inspections report at 11 a.m. EST Tuesday and its weekly crop progress report at 4 p.m. EST. The reports, normally issued Mondays, were delayed a day for Veterans Day.

 

Traders said they expect the crop progress report to show a decline in condition ratings for U.S. Plains states due to a lack of rain. The driest areas of the western Plains are not expected to see significant rainfall during the next five to seven days, DTN Meteorlogix said.

 

Traders are taking note of dryness in hard red winter wheat areas of the Plains but know that spring rains are what really make or break a crop, an analyst said. In the U.S. Midwest, soft red winter wheat will benefit from the shower activity and warm temperatures, Meteorlogix said

 

In Argentina, cooler weather is headed for wheat regions Tuesday night and Wednesday. The coldest temperatures are expected to cause frost and possibly a light freeze through southern wheat areas, Meteorlogix said. Any heading or flowering wheat would be at risk should temperatures fall to subfreezing levels, according to the weather firm.