December 1, 2006

 

US Wheat Outlook on Friday: 1-2 cents lower on weaker overnight trend

 

 

U.S. wheat futures are expected to start Friday's day session lower after weaker overnight action and in the absence of any fresh, supportive news, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 1-2 cents per bushel lower.

 

In e-cbot overnight trade, CBOT March wheat was down 2 cents to US$5.19 1/2.

 

CBOT March wheat prices Thursday gapped higher on the daily bar chart and closed near the session high on bullish weekly U.S. Department of Agriculture export sales data, a technical analyst said.

 

A CBOT floor source said he did not expect much follow-through buying Friday because it is the first of the month.

 

Also, CBOT March wheat is still in a well-defined seven-week-old down-trending channel on the daily bar chart, even though prices Thursday climbed to the upper boundary of trend line resistance, the analyst noted. A higher close on Friday would negate the down trending channel and be "a bullish clue," the analyst said.

 

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

 

First resistance is seen at Thursday' high of US$5.25 1/2 and then at US$5.28. First support lies at Thursday's low of US$5.14 1/2 and then at US$5.10, he said.

 

Kansas City Board of Trade March wheat prices Thursday closed near the session high and closed at a monthly high close, the analyst added. Bulls have the near-term technical advantage and gained more momentum Thursday, he said.

 

The bulls' next upside price objective is closing KCBT March prices above solid technical resistance at the contract high of US$5.67 1/2 a bushel. The bears' next downside objective is closing prices below solid support at the November low of US$5.17 a bushel, the analyst said.

 

First resistance is seen at Thursday's high of US$5.52 1/2 and then at US$5.55. First support is seen at US$5.45 and then at Thursday's low of US$5.42, he said.

 

Pressure is seen from weaknesses in the outside and Chinese markets, CBOT floor sources said.

 

In China, drier and colder weather during the next five to seven days will slow development of crops, the DTN Meteorlogix weather firm said. Rain is still needed in the northern areas but is more important in the spring, the firm said.

 

China is expected to hold more auctions to sell wheat from state reserves over the next six months, to prevent prices in the domestic market from surging because of thin supplies, local traders said Friday.

 

Under a plan to support farmers' incomes, China's central government designated state-owned warehouses in six major wheat growing provinces to buy wheat at minimum purchase prices from June to September. Wheat purchases by state-owned warehouses totaled more than 43 million tonnes during this period, compared to around 10 million tonnes in 2005.

 

Concerns about dryness in the U.S. Southern Plains continue, although the region received some moisture from stormy weather sweeping over the central and eastern Midwest, Meteorlogix said. The most extensive precipitation in the Plains hit Oklahoma, southeastern Kansas, and north-central Texas, with moisture totaling up to 3/4 of an inch, the firm said.

 

The Plains still need additional moisture, however, to stave off drought concerns, Meteorlogix said. Forecasts show wheat areas will have normal to below-normal precipitation next week, according to the firm.

 

Elsewhere, Argentina should see showers that will maintain mostly favorable conditions for developing crops, the firm said.

 

In other news, the Taiwan Flour Millers Association bought 44,100 metric tonnes of U.S. No. 1 wheat in a tender concluded Friday for shipment Dec. 28 to Jan. 11, an association official said.

 

India, meanwhile, said 2007 wheat output may hit 73 million tonnes, up 4.6% from the estimated output this year, a government official said. India is estimated to have produced 69.8 million tonnes of wheat this year, down from 72 million tonnes produced in 2005, leading to a sudden surge in imports after a gap of six years.