November 15, 2007

 

US Wheat Outlook on Thursday: 2-4 cents higher on short-covering, e-CBOT

 

 

Short-covering and follow-through buying from the overnight are expected to drive U.S. wheat futures modestly higher at the start of Thursday's day session, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 2 to 4 cents per bushel higher. In e-CBOT overnight trading, CBOT December wheat was up 3 1/2 cents at US$7.56.

 

Traders will likely continue to even up some positions during the day session following recent losses, a CBOT floor trader said. Activity in outside markets, such as crude oil, will also influence the market in the absence of other fresh fundamental news, he said.

 

The U.S. Department of Agriculture's weekly export sales report, usually released on Thursdays, is delayed a day this week due to Monday's Veterans Day holiday.

 

"That leaves grain traders as energy traders," according to a research note from MF Global's Kansas City Board of Trade office.

 

Concerns about unfavorable dryness in hard red winter wheat areas of the U.S. Plains remain supportive for new-crop futures, floor traders said. Mostly dry weather and above-normal temperatures in dry western areas of the region during the next seven days will increase stress on the emerging and developing crop, DTN Meteorlogix said.

 

"Some significant precipitation may develop in some of the dry areas in the 8-10 day period," Meteorlogix said. "However, this is uncertain."

 

It also may be slightly supportive that France lowered its 2007-08 soft wheat output to 30.9 million tonnes from its October estimate of 31.3 million tonnes, an analyst said. The latest estimate represents a 7.2% drop on the year and a fall of 10.3% from the five-year average.

 

European Union wheat prices are more competitive after recent price drop and are now almost at parity with Russian wheat, according to an analytical report by Strategie Grains. E.U. exports on the world market should rise after a slow pace so far in 2007-08, but will face tough competition from Argentina and the U.S., which still holds a price advantage to E.U. wheat, the report said.

 

Japan bought 155,000 metric tonnes of wheat, including 90,000 tonnes from the U.S., in a routine tender concluded Thursday. The entire shipment is expected to arrive in Japan from Dec. 1 to Jan. 31.

 

The bulls' next upside price objective is to push and close CBOT December wheat above major psychological technical resistance at US$8.00. The next downside price objective for the bears is pushing and closing prices below solid support at US$7.50. First resistance is seen at Wednesday's high of US$7.78 and then at this week's high of US$7.89. First support lies at last Wednesday's low of US$7.63 and then at US$7.50.

 

At the KCBT, the bulls' next upside price objective is pushing and closing December wheat above major psychological resistance at US$8.00. The bears' next downside objective is closing prices below solid technical support at US$7.50. First resistance is seen at Wednesday's high of US$7.85 and then at US$7.92. First support is seen at Wednesday's low of US$7.69 and then at US$7.60.

 

In other news, China sold 18,802 metric tonnes of imported wheat from its state reserves, or 14.8% of the 126,904 tonnes it planned to sell. It was the highest amount the government has sold in recent auctions of imported wheat and above the 700 tonnes of imported wheat sold last week.