November 28, 2006

 

US Wheat Outlook on Tuesday: Mixed open with buyers seen as cautious

 

 

U.S. wheat futures are expected to start Tuesday's day session mixed, with buyers nervous after losses during Monday's day session, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open mixed.

 

In e-cbot overnight trade, CBOT March wheat was 2 3/4 cents lower at US$5.11 1/4 a bushel.

 

CBOT March wheat prices opened stronger Monday but closed near the session low on profit-taking pressure from recent gains, sources said. That is going to make market participants think twice before buying Tuesday, said Shawn McCambridge, an analyst with Prudential Financial.

 

"People are going to be a little bit cautious entering the market after yesterday's failure," he said. "With yesterday's wide trading range by midday, it just has some people feeling that the sidelines may be the safest place to be."

 

CBOT March wheat remains in a well-defined six-week-old down-trending channel on the daily bar chart and needs a move above trend-line resistance at Monday's high of US$5.28 to push above the channel, a technical analyst said.

 

The next downside price objective for the CBOT bears is closing prices below support at US$5.00. The bulls' next upside price objective is to close prices above solid resistance at Monday's high of US$5.28, the analyst said.

 

First resistance is seen at US$5.20 and then at US$5.25. First support lies at Monday's low of US$5.07 and then at US$5.00, he said.

 

KCBT March wheat also closed near the session low Monday, but bulls have a slight near-term technical advantage, the analyst said.

 

The next upside price objective for the bulls is closing KCBT March prices above solid technical resistance at Monday's high of US$5.50. The bears' next downside objective is closing prices below solid support at the November low of US$5.17, he said.

 

First resistance is seen at US$5.40 and then at US$5.45. First support is seen at Monday's low of US$5.31 1/2 and then at US$5.25, the analyst said.

 

There may be some support for prices from concerns about the quality of the U.S. winter wheat crop, a CBOT floor trader said.

 

The U.S. Department of Agriculture on Monday afternoon reported 53% of the crop was rated in good-to-excellent condition as of Nov. 26, four percentage points lower than ratings from a week earlier. Eleven percent of the crop was in very poor-to-poor condition, up two percentage points from a week ago.

 

In Kansas, the country's largest wheat-producing state, 51% of the crop was rated in good-to-excellent condition, down four percentage points from last week. In Oklahoma, 42% of the crop was in good-to-excellent condition, down three percentage points from last week.

 

Analysts said the conditions bear watching, although it is too early for the weather to affect crop production.

 

"We'll see what happens in the spring," McCambridge said. "People will look at the fall ratings, but it really depends what the spring weather conditions are to really determine the production potential of this crop."

 

In the U.S. Southern Plains, which have suffered from hot and dry conditions, a turn to much colder weather will slow growth of wheat and force it into dormancy, the DTN Meteorlogix weather firm said. The best chance for beneficial moisture for wheat is in north-central Texas and southern Oklahoma, the firm said.

 

In the eastern Midwest, there will only be one to two more days of favorable harvest weather before rain and possibly snow hit and temperatures drop, Meteorlogix said.

 

Soil moisture should continue to diminish in the Ukraine, which has been dry, without any significant precipitation expected during the next seven days, the firm said.

 

Development of China's wheat crop will slow as conditions turn drier and cooler during the next seven days, Meteorlogix said. Rain is still needed in the northern areas, but this will be more important in the spring than it is now, the firm added.

 

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

 

Japan, meanwhile, said Tuesday it was seeking 160,000 metric tonnes of wheat in a routine tender to be concluded Thursday for shipment Jan. 1-31. The tender includes 40,000 tonnes of U.S. western white wheat, 31,000 tonnes of dark northern spring wheat and 29,000 tonnes of U.S. hard red winter wheat.

 

In other news, the Indian government said it may consider extending the period for duty-free imports of wheat by private companies beyond Dec. 31. The government created the duty-free import period for private companies because it was feared that a surge in supplies from abroad could depress prices to undesirably low levels and discourage local farmers from sowing wheat, an official said.

 

Traders, however, say private wheat imports have ground to a near halt because companies aren't prepared to take the risk of contracting shipments that may arrive after Dec. 31 or don't get berths at port due to bottlenecks.