November 26, 2007
US Wheat Outlook on Monday: 10-15 cents higher on Indian tender, e-CBOT
U.S. wheat futures are expected to start Monday's day session higher on firm overnight trade and an Indian tender, traders said.
Benchmark Chicago Board of Trade March wheat is called to open 10 to 15 cents per bushel higher. In e-cbot overnight trading, CBOT March wheat climbed 15 1/4 cents to US$8.60 3/4.
Indian state-run trading company PEC Ltd. issued a tender to import an unspecified volume of wheat. The agency is seeking about 350,000 tonnes of wheat, further draining an already tight global market in which prices have soared as a result of poor harvests in Europe and Australia.
The U.S. is not expected to sell any wheat to India due to disputes over quality requirements, but the tender is still bullish because world stocks are low and delivery is in the near-term, traders said. The tender closes Dec. 3, with bids valid until Dec. 8 and delivery set for sometime before March 10.
"I view the tender as very supportive, very bullish," a CBOT floor trader said.
On Friday, another Indian state trading firm, MMTC Ltd., accepted bids to import around 342,500 tonnes of wheat at an average weighted price of US$400 per tonne.
U.S. wheat futures rallied last week with support from Indian demand, although there are ideas that the gains were short-term overdone, a CBOT trader said. There may be some profit-taking this week, but the longer-term trend is bullish, he said.
"Bulls do have fresh upside near-term technical momentum and gained more power on Friday," a technical analyst said.
The bulls' next upside price objective is to push and close CBOT March wheat above solid technical resistance at US$8.75, he said. The next downside price objective for the bears is pushing and closing prices below solid support at US$8.15 a bushel. First resistance is seen at Friday's high of US$8.56 and then at US$8.61 1/2. First support lies at US$8.33 and then at Friday's low of US$8.27.
At the Kansas City Board of Trade, the bulls' next upside price objective is pushing and closing March wheat above major psychological resistance at US$9.00. The bears' next downside objective is closing prices below solid technical support at US$8.40. First resistance is seen at Friday's high of US$8.74 and then at US$8.80. First support is seen at US$8.50 and then at Friday's low of US$8.42 1/2.
There are some supportive concerns about the condition of Argentina's 2007-08 wheat crop, a CBOT trader said. The crop deteriorated significantly last week due to frost earlier in the month, although total production isn't expected to fall, the Buenos Aires Cereals Exchange said.
According to the exchange, about 60% of the wheat crop was in good or very good condition as of Friday, compared to 73% the previous week. As of Friday, farmers had harvested 14% of the area planted with wheat this season, 6.2 percentage points behind last year's pace.
It looks as though weather concerns in the U.S. central and southern Plains may be easing a bit, with moisture expected in some dry areas later this week, traders said. Light, mixed precipitation in region during the weekend will do little to improve soil moisture conditions, except in eastern Texas and Oklahoma where rains were heavier, DTN Meteorlogix said.
In China, new wheat prices were higher in the week to Monday on rising corn prices, but old wheat prices were stable. High corn prices forced feedmeal processing plants to use more wheat as a substitute, pushing up wheat prices. During its weekly auction last Wednesday, the government sold 1.23 million tonnes of wheat bought under the minimum purchase price program, or 84% of the 1.47 million tonnes it planned to sell, a record high ratio. To ease the tight supply, China plans to auction 2.5 million tonnes of wheat this Wednesday, 1 million more than last week's plan.
