November 30, 2006

 

US Wheat Outlook on Thursday: Higher open on export sales, rebound

 

 

U.S. wheat futures are expected to start Thursday's day session firmer on news of strong export sales and in the continuation of a rebound from losses earlier this week, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 3-4 cents higher per bushel.

 

In e-cbot overnight trade, CBOT March wheat was up 3 1/2 cents at US$5.15.

 

The U.S. Department of Agriculture said Thursday that U.S wheat sales for the week ended Nov. 23 were 547,800 metric tonnes, 52% above the previous week but equal to the prior 4-week average. Major buyers were Japan at 91,600 tonnes, Italy at 62,500 tonnes and Egypt at 59,000 tonnes.

 

Traders and analysts surveyed by Dow Jones Newswires had estimated sales would range between 250,000 tonnes and 550,000 tonnes.

 

"Export sales are higher. It's definitely supportive," a CBOT floor source said.

 

Deliveries posted against the December CBOT wheat contract, meanwhile, were below trade expectations at 1,872 contracts. Traders and analysts had expected deliveries of 2,500 to 5,000 contracts.

 

Large issuers included Tenco Inc., which issued 1,382 contracts, and ADM Investor Services, which issued 274 contracts. Large stoppers included Man Financial, which stopped 652 contracts, and Banc of America Securities, which stopped 524 contracts.

 

The number of deliveries should have little effect on prices during the day session, however, because firms can always issue more later, a CBOT floor trader said.

 

"Sometimes they like to put out feelers first," he said. "The can always come back and put out more."

 

But U.S. wheat futures should see continued support Thursday from short-covering and bargain-buying that began late in Wednesday's day session, sources said. Futures prices rallied to higher closes Wednesday on a bounce from earlier losses in the day session and this week, sources noted.

 

CBOT March wheat prices, which closed near the session high Wednesday, scored a bullish "outside day" up on the daily bar chart, a technical analyst said. CBOT March wheat, however, is still in a well-defined seven-week-old down-trending channel on the daily bar chart, he 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, the analyst 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 Wednesday's high of US$5.13 and then at US$5.18. First support lies at US$5.05 and then at US$5.00, he said.

 

March Kansas City Board of Trade wheat prices Wednesday settled near the session high and closed at the highest closing level in three weeks, the analyst said. The bulls have the near-term technical advantage and gained more momentum Wednesday, he said.

 

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

 

First resistance is seen at US$5.45 and then at US$5.50. First support is seen at US$5.35 and then at Wednesday's low of US$5.31, the analyst said.

 

In other news, Jordan said Thursday it was tendering to buy 50,000 metric tonnes of wheat on a cost-and-freight basis for delivery during the first half of January. The deadline for offers is Dec. 13, he said.

 

Japan said it bought 140,000 metric tonnes of wheat in a routine tender concluded on Thursday for shipment Jan. 1-31. The purchase includes 40,000 tonnes of U.S. western white wheat, 29,000 tonnes of U.S. semi hard wheat and 31,000 tonnes of U.S. dark northern spring wheat.

 

India said its wheat output in 2007 may rise by at least 2.5 million metric tonnes from the previous year, spurred by timely sowing and additional plantings of about a million hectares, an official said. India also may be exporting wheat in a few years "if all goes well," the official added.

 

China, meanwhile, auctioned 932,300 metric tonnes of wheat, including summer-harvested wheat, imported wheat and newly-harvested wheat, auctioneers said Thursday. Philippine feed millers bought 48,000 metric tonnes of Chinese feed wheat for arrival in February, traders said.