November 27, 2006

 

US Wheat Outlook on Monday: 4-6 cents higher on technical strength

 

 

U.S. wheat futures are expected to start Monday's day session firmer on stronger overnight trade and technical support from recent advances, sources said.

 

Benchmark Chicago Board of Trade December wheat is called to open 4 to 6 cents per bushel firmer.

 

In e-cbot overnight trade, December wheat was up 5 1/2 cents at US$5.05 1/2, and March wheat was up 7 cents at US$5.26.

 

CBOT July wheat posted a new contract high overnight and that should give technical strength to other contracts, a CBOT floor source said.

 

The gains followed a sharply higher close to Friday's day session in a rally buoyed by fund interest, traders said. There should be follow-through buying Monday, they added.

 

At CBOT, bulls have regained "solid upside technical power" and negated a well-defined four-week-old down-trending channel on the daily bar chart, a technical analyst said.

 

The bulls' next upside price objective is to close prices above solid resistance at US$5.20. The next downside price objective for the bears is closing prices below support at the November low of US$4.66, the analyst said.

 

First resistance is seen at Friday's high of US$5.01 and then at US$5.10. First support lies at Wednesday's low of US$4.95 and then at US$4.90, he said.

 

There is some support seen from recent dry conditions in the U.S. growing regions, although analysts caution it is too early for weather to impact the outcome of the winter wheat crop.

 

In the U.S. Southern Plains, which have seen dry and warm conditions lately, the DTN Meteorlogix weather firm said much colder weather and some precipitation is likely during the week.

 

In the eastern Midwest, favorable harvest weather continues for a few more days before rain and possibly snow hits, the weather firm said.

 

There is no significant precipitation expected during the next seven days in the Ukraine, Meteorlogix said. Soil moisture for wheat should diminish, the firm said.

 

Rains of 0.50-1.50 inches occurred during the weekend in China's southern areas, while the north had precipitation of 0.10-0.50 inch, Meteorlogix said. Precipitation favors wheat, although more is still needed in the northern belt, the firm said.

 

China plans to auction 1.1 million tonnes of wheat this week, auctioneers said. The supply will include summer-harvested domestic wheat, newly-harvested domestic wheat and imported wheat, sources said.

 

Over the weekend, China sold 1.09 million tonnes of summer-harvested wheat in auctions. China's wheat prices fell slightly in major producing regions last week, pressured by the weekend auctions, analysts said.

 

China's central government designated state-owned warehouses in six major wheat growing provinces to buy wheat at minimum purchase price from June to September. The idea was to prevent wheat prices from slumping after a good harvest this year and protect farmers' incomes.

 

In Argentina, the southern wheat belt was dry and there is some concern for late development of the wheat, Meteorlogix said.

 

Argentina said its 2005-06 wheat sales totaled 8.17 million metric tonnes as of Nov. 24. That puts sales up from 8.16 million tonnes a week earlier. By this time last year Argentina had sold 11.085 million tonnes of 2004-05 wheat, according to the government.

 

India's wheat planting, meanwhile, covered 11.3 million hectares in Oct. 1-Nov. 24 compared with 9.6 million hectares in the same period last year, according to new data provided by the government. India's winter-sown crops are planted from October to December.

 

The government didn't provide any explanations for the increase or decrease in sown area.

 

In other news, a CBOT floor trader noted the U.S. dollar was stronger and said that may pressure wheat prices.