November 29, 2006

 

US Wheat Outlook on Wednesday: 3-5 cents down on weak momentum, little news

 

 

U.S. wheat futures are expected to start Wednesday's day session lower on weaker momentum from recent downside action and with a lack of fresh news to inspire buying, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel lower.

 

In e-cbot overnight trade, CBOT March wheat was down 6 cents at US$5.08.

 

There was little news out overnight to boost prices, and there may be some follow-through technical selling from a Tuesday's lower close, sources said. Funds also may continue selling ahead of first notice for December futures on Thursday, a CBOT floor trader noted.

 

Overall, however, there are few new inputs to direct prices, he said.

 

"Everybody's just sort of on hold right now," the trader said.

 

The next piece of tradable news may be the release of weekly export sales Thursday, another CBOT floor source added. Prices will likely be pressured by continued disappointment over mediocre sales amid tightened global supplies, he said.

 

"The market is certainly concerned about demand," he source said. "It's looking to find the right price to generate business."

 

CBOT March wheat remains in a well-defined six-week-old down-trending channel on the daily bar chart, a technical analyst said. It will take a push in prices above trend-line resistance at this week's high of US$5.28 to push above the down-trending channel, he said.

 

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

 

First resistance is seen at Tuesday' high of US$5.12 and then at US$5.18. First support lies at Tuesday's low of US$5.02 and then at US$5.00, he said.

 

Trading during the day session is expected to be choppy and relatively thin, sources said.

 

There is talk among traders about the possible impact of dry conditions on wheat in the U.S. Great Plains, although it is too early for the weather to affect the crop, sources said.

 

In the dry Southern Plains, a turn to much colder weather will slow the 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 southeast Oklahoma, the firm said.

 

In the eastern Midwest, rain and snow with much colder weather will move in during the next few days, halting any late harvest activities, the firm said.

 

Overseas, soil moisture for wheat in the Ukraine should diminish as there is no significant precipitation expected during the next seven days, Meteorlogix said.

 

China should see drier and colder conditions during the next seven days, which will slow development of crops, the firm said.

 

In Argentina, scattered showers should return during the last part of this week or during the weekend, Meteorlogix said.

 

In other news, the U.S. Department of Agriculture Secretary said Australia must take away the monopoly authority AWB Ltd. has over the country's wheat exports.

 

The comments from Mike Johanns came in the wake of a report that found AWB officials may have broken the law by giving kickbacks to Saddam Hussein's regime between 1999 and 2003. Australian Prime Minister John Howard has said the current wheat export marketing arrangements can not continue in the wake of the scandal, although the government has indicated it won't abolish the so-called single desk wheat export system.

 

The USDA officially announced Tuesday that it will reinstate a ban on AWB's subsidiary in the U.S., preventing it from participating in U.S. government export credit programs.