November 16, 2007

 

US Wheat Outlook on Friday: Mixed start following overnight weakness

 

 

U.S. wheat futures are called to start Friday's day session mixed to lower, with early profit-taking and follow-through selling from the overnight expected, traders said.

 

In e-cbot overnight trading, Chicago Board of Trade December wheat fell 2 cents to US$7.63 1/2 per bushel.

 

Wheat rose Thursday but pulled back overnight amid a lack of fresh bullish news, a CBOT floor analyst said. The markets are still in a technical downtrend, he added.

 

"Right now, the bears still have downside technical momentum as near-term chart damage has been inflicted recently," a technical analyst said. "A six-week-old downtrend line is still in place on the daily bar chart."

 

Weekly wheat export sales of 416,000 metric tonnes may help prices firm up, a CBOT floor trader said. The sales were at the high end of analysts' estimates, although there are still bearish concerns about a slowdown in demand, he said.

 

Major buyers included Taiwan, which took 81,100 tonnes; Japan, which bought 78,900 tonnes; and Indonesia, which bought 54,900 tonnes. Cancellations and buybacks were 129,900 tonnes, down from 301,400 tonnes last week, the USDA said.

 

Positioning before the weekend and before the upcoming holiday week may tug prices higher during the session, a CBOT floor trader said. Volume is expected to be thinner next week due to Thanksgiving.

 

Concerns about dryness in parts of the U.S. southern Plains could provide further underlying support, an analyst said. Dryness continues to stress wheat growth through the western belt, according to DTN Meteorlogix.

 

The weather firm's long range outlook shows a slight chance for significant rainfall in the dry area. Cooler weather during the next six to 10 days should slow development of the wheat crop, Meteorlogix said.

 

In Argentina, a frost and freeze across Buenos Aires on Thursday may have hurt flowering or heading wheat, but the damage isn't expected to be a "major concern," Meteorlogix said. Drier weather in Australia, meanwhile, should help improve conditions for mature wheat and the wheat harvest, the firm said.

 

The bulls' next upside price objective is to push and close CBOT March wheat above major psychological technical resistance at US$8.00, the technical 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$7.63 a bushel. First resistance is seen at Thursday's high of US$7.93 and then at US$8.00. First support lies at last Thursday's low of US$7.75 and then at US$7.63.

 

At the Kansas City Board of Trade, bulls' next upside price objective is pushing and closing March wheat above resistance at US$8.20, the technical analyst said. The bears' next downside objective is closing prices below solid technical support at this week's low of US$7.69. First resistance is seen at Thursday's high of US$8.01 and then at US$8.10. First support is seen at Thursday's low of US$7.86 and then at US$7.80.

 

In other news, Canada raised its 2007-08 all-wheat ending stocks estimate to 4.9 million tonnes from is October estimate of 4.7 million. The government increased its export forecast to 14.25 million tonnes from 14.15 million.

 

China plans to sell 200,000 metric tonnes of imported wheat from state reserves in an auction Wednesday, the China National Grain and Oil Trade Center said. China holds auctions of imported wheat regularly each month to meet domestic demand.