November 14, 2007

 

US Wheat Review on Tuesday: Falls on bearish technicals, weak demand

 

 

Technical weakness and bearishness about demand shoved U.S. wheat futures lower Tuesday, analysts said.

 

Chicago Board of Trade December wheat tumbled 13 cents to US$7.48, its lowest close since Aug. 28. Kansas City Board of Trade December wheat fell 14 1/2 cents to US$7.62, and Minneapolis Grain Exchange December wheat slid 8 1/2 cents to US$8.08 1/2.

 

Commodity funds sold an estimated 3,000 contracts at the CBOT. MF Global spread 1,700 December/March, while RJ O'Brien spread 1,200 December/March and Tenco spread 600 December/March. Fimat spread 1,000 March/December.

 

Wheat futures are in a technical downtrend, and bears gained more momentum from Tuesday's losses as CBOT December wheat closed below key support at US$7.50, an analyst said. The contract's next target is a retracement to around US$7.08, said Doug Houghtonne, market analyst for Brock Associates.

 

Along with technical pressure, bearish fundamentals weighed on wheat, analysts said. Argentina re-opened its wheat export registry Tuesday and should be a fierce competitor for export business on the world market, they said.

 

India's agriculture minister, meanwhile, said the government may not need any more wheat after it has completed previously announced plans to buy 1 million tonnes. An increase in India's wheat plantings may help cover the country's demand, the minister said.

 

India's three state-run trading firms - MMTC Ltd., PEC Ltd. and State Trading Corporation - have been asked to float tenders to import a combined 1 million tonnes of wheat. MMTC Ltd. floated the first tender to import 350,000 tonnes of wheat Monday.

 

India has imported 282,000 tonnes of wheat so far from a total federal government purchase of 1.306 million tonnes in the current crop year that began in July, according to the latest government data.

 

"The market's defensive about demand right now," Houghtonne said. "The market's on the defensive because we saw almost no new net exports last week. With Argentine wheat coming into the market, the market sees probably some potential for cancellations in the near term."

 

The markets in the short-term also will continue to wait for signs of a pick-up in export demand, traders said. The U.S. Department of Agriculture said weekly export inspections were 23.138 million bushels, which was below trade expectations of 28 million to 33 million.

 

A downturn in crude oil futures also kept wheat on the defensive, Houghtonne said. Outside markets, including energies and precious metals, have influenced the grains in recent sessions.

 

 

Kansas City Board of Trade

 

An increase in a private firm's estimate for 2008 U.S. wheat acreage was seen as bearish, a KCBT floor trader said. Private analytical firm Informa Economics pegged U.S. winter wheat acreage at 64.1 million acres, up about 350,000 acres from the firm's Oct estimate and up from the 60.4 million planted in 2007-08.

 

Strong wheat futures prices were seen as an incentive to producers to plant more wheat, analysts said. However, there are concerns about dryness in the parts of the U.S. Plains, and they are supportive to new-crop KCBT wheat, a trader said..

 

The driest areas of the western Plains show little rainfall during the next five to seven days, DTN Meteorlogix said. Concern is building regarding wheat conditions as the crop cycle heads toward dormancy, the firm said.

 

The UDSA is slated to release its weekly crop progress report at 4 p.m. EST Tuesday. Traders expect to see a decline in good-to-excellent condition ratings for Plains states and for total seeding to be about 96% complete.

 

 

Minneapolis Grain Exchange

 

Wheat is technically weak, a MGE floor trader said. The market looks to be in an oversold condition after recent losses and should be due for a bounce, he said.

 

Morocco's state wheat buyer, the Office National Interprofessional des Cereales et des Legumineuses, said it was tendering to buy 316,000 metric tonnes of soft milling wheat, of any origin, from importers inside the country. The news is friendly, although it is unclear whether the wheat has already been imported and is in Morocco, the trader said.