November 27, 2007

 

US Wheat Outlook on Tuesday: Up 4-6 cents on positioning, crop concerns

 

 

U.S. wheat futures are expected to start Tuesday's day session firmer on position-squaring and concerns about deteriorating crop conditions, analysts said.

 

Benchmark Chicago Board of Trade March wheat is called to open 4 to 6 cents per bushel higher. In e- CBOT overnight trading, CBOT March wheat rose 7 1/4 cents to US$8.41 1/4.

 

Traders are looking ahead to first notice day for December contracts on Friday, and shorts are exiting the markets, according to a market comment from Alan Brugler, president of Brugler Marketing & Management.

 

The markets are also keeping an eye on declining crop conditions in the U.S. Southern Plains, analysts said. Conditions deteriorated slightly last week and remain well below year-ago levels, the U.S. Department of Agriculture said Monday afternoon in its weekly crop progress report.

 

The USDA said 44% of the U.S. winter wheat crop was in good-to-excellent condition as of Nov. 25, one percentage point below last week and nine percentage points behind last year's 53% good-to-excellent rating. Analysts had expected conditions to decline by 1 to 3 percentage points.

 

Although the drop was expected, dryness is still a concern as it may signal more trouble for the crop down the road, an analyst said. The world cannot afford to suffer any major crop problems as global wheat stocks are already at low levels, he said.

 

"I continue to hear reports of significant acreage that hasn't even been planted due to dry soils as far north as western Kansas," said Farm Futures analyst Arlan Suderman. "Oklahoma rates 30% of its crop as poor to very poor while Texas reports that 53% of its crop is poor to very poor. This has end users quite nervous about prices."

 

World wheat supplies may tighten even more following a tender Monday from an Indian state-run trading company, an analyst said. A CBOT floor trader said it also was bullish that wheat stocks held in storage facilities operated by Australia's major bulk grain handling companies and traders fell 18% on month in October to 1.4 million metric tonnes.

 

The bulls' next upside price objective is to push and close CBOT March wheat above solid technical resistance at Monday's high of US$8.63, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$8.00. First resistance is seen at US$8.50 and then at US$8.63. First support lies at Monday's low of US$8.31 and then at US$8.15.

 

At the KCBT, bulls' next upside price objective is pushing and closing December wheat above solid resistance at Monday's high of US$8.80. The bears' next downside objective is closing prices below solid technical support at US$8.35. First resistance is seen at US$8.65 and then at US$8.75. First support is seen at US$8.50 and then at US$8.40.

 

On Liffe's European wheat futures markets, prices were higher, erasing an early dip as consumer buying encountered a lack of selling interest, traders said. Farmers are strong holders again, a broker said, noting that a recent uptick in prices has given farmers renewed bullish confidence.