November 14, 2007

 

US Wheat Outlook on Wednesday: Lower on overnight, bearish technicals

 

 

Overnight weakness and bearish technicals are expected to keep U.S. wheat futures on the defensive at the start of Wednesday's day session, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 5 to 7 cents per bushel lower. In e-cbot overnight trading, CBOT December wheat slipped 7 1/4 cents to US$7.40 3/4.

 

There should be follow-through selling from the overnight, with the bears feeling downside momentum after recent losses, traders said. CBOT December wheat Tuesday closed below US$7.50, which was seen as a key level of support, and is vulnerable to more technical pressure, an analyst said.

 

Wheat is still "the weak leg" in the grains market, he said.

 

The bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at US$7.80, a technical 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$7.40. First resistance is seen at Tuesday's high of US$7.65 and then at this week's high of US$7.70. First support lies at last week's low of US$7.45 and then at US$7.40.

 

At the Kansas City Board of Trade, bulls' next upside price objective is pushing and closing December wheat above solid technical resistance at this week's high of US$7.88 1/2. The bears' next downside objective is closing prices below solid technical support at US$7.50. First resistance is seen at US$7.70 and then at Tuesday's high of US$7.80 1/2. First support is seen at Tuesday's low of US$7.62 and then at US$7.50.

 

The wheat markets are still looking for a pick-up in demand to push prices higher, a CBOT floor trader said. Weekly U.S. export sales data will be released Friday, a day later than usual due to the Veterans Day holiday.

 

The Russian government plans to introduce further limitations on wheat exports in January, according to the agriculture ministry. Russia already has a 10% tax on wheat exports in place, but further restrictions are necessary because exports are continuing at a high pace and the government does not want a domestic grain deficit, the minister said.

 

Jordan, meanwhile, is looking to buy 100,000 metric tonnes of wheat in a tender, with half for shipment before Nov. 30 and half for shipment during the first half of December. The U.S. isn't expected to win the business, but the tender could offer some underlying support because the wheat is for delivery in the near-term, when stocks are still tight, a CBOT floor trader said.

 

Morocco's state wheat buyer said Tuesday it was tendering to buy 316,000 metric tonnes of soft milling wheat, of any origin, from importers inside the country.

 

There are also growing concerns about persistent dryness in wheat-growing areas of the U.S. Plains, a trader said. Emergence in Kansas was at 86% as of Sunday, down from the average of 91%, according to the U.S. Department of Agriculture. In Oklahoma emergence was 74%, down from the average of 90%.

 

In Kansas, 49% of the crop was in good-to-excellent condition as of Sunday, down from 55% a week earlier. The USDA said 16% of the crop was poor to very poor, up from 14% last week.

 

The UDSA said 40% of Oklahoma's crop was in good-to-excellent condition, down from 45% last week. Twenty-four percent of the state's crop was rated poor to very poor, up from 20% last week, according to the USDA.

 

The central and southern Plains should see mostly dry weather and above normal temperatures during the next seven days, DTN Meteorlogix said. The conditions will increase stress on the emerging and developing crop in the dry western areas, the private weather firm said. Some significant precipitation may develop in some dry areas in the next eight to 10 days, Meteorlogix said.