December 4, 2006

 

US Wheat Outlook on Monday: 3-4 cents lower open on overnight momentum

 

 

U.S. wheat futures are expected to start Monday's day session lower on weaker overnight action and a lack of bullish news to boost prices, traders said.

 

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

 

In e-cbot overnight trade, CBOT March wheat was down 4 cents at US$5.16 3/4.

 

Outside markets also were weaker and may help pressure wheat prices lower during the day session, a CBOT floor trader added. He said traders remain disappointed with mediocre export business amid tightened global supplies.

 

"There's just nothing new on the export front," he said.

 

CBOT March wheat closed slightly lower and near mid-range Friday, and is still in a well-defined seven-week-old down-trending channel on the daily bar chart, a technical analyst noted. A solidly higher close Monday, however, would negate the channel and support bulls, he 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 last week's high of US$5.28, the analyst said.

 

First resistance is seen at Friday' high of US$5.25 and then at US$5.28. First support lies at Friday's low of US$5.16 and then at US$5.12 1/2, he said.

 

At the Kansas City Board of Trade, bulls still have the near-term technical advantage, even though KCBT March wheat closed lower Friday, the analyst added.

 

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, he said.

 

First resistance is seen at Friday's high of US$5.48 and then at US$5.50. First support is seen at Friday's low of US$5.42 1/2 and then at Thursday's low of US$5.40, he said.

 

Looking at the weather, dryness in the U.S. Southern Plains will reduce available soil moisture for wheat this week, although there is a chance for increasing precipitation through southeastern areas next week, the DTN Meteorlogix weather firm reported. Temperatures weren't cold enough in the region this past weekend to harm winter wheat, the firm noted.

 

In the eastern Midwest, there are no significant concerns for wheat at this time, the firm said.

 

In Argentina, rainfall over the weekend will help maintain mostly favorable conditions for crops, Meteorlogix said.

 

China, meanwhile, should see drier and colder weather during the next five to seven days, conditions that will slow development of the crops, Meteorlogix said. The firm noted rain is still needed in the northern areas, but said it is more important to see it in the spring than now.

 

As part of its ongoing effort to support farmers' incomes, China plans to auction a total 800,000 metric tonnes of wheat Thursday, auctioneers said Monday.

 

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.

 

The auctions are slated to take place in Hebei, Henan, and Anhui provinces, all major wheat-growing regions in northern and central China.

 

Government wheat auctions have largely eased a supply shortage in China, analysts said. China's wheat prices were mostly stable last week, with small rises in some regions, they said.

 

In other news, the Commodity Futures Trading Commission has said it expects to release a review of its weekly report on commodity investments within the next two weeks. The CFTC announced in June it was conducting a comprehensive review of its report because of "questions as to whether the (Commitments of Traders) report can reliably be used to assess futures hedging activity."

 

"It would be great to have more transparency on the hedge fund activity," a CBOT floor source said. "Anything would help."

 

Funds were net long 29,095 CBOT contracts as of Nov. 28, the CFTC reported. Funds lifted longs by 1,216 contracts and increased shorts by 683 contracts at CBOT, the CFTC said.

 

At KCBT, funds were net long 36,358 contracts, according to the CFTC. They increased longs by 593 and cut shorts by 222, the CFTC said.

 

At MGE, funds lifted longs by 692 and decreased shorts by 153 contracts, the CFTC said. Funds were net long 10,770 contracts at MGE, according to the CFTC.