December 4, 2007

 

US Wheat Outlook on Tuesday: Flat-up 2 cents; choppy trade expected

 

 

U.S. wheat futures are expected to start trading flat to 2 cents higher Tuesday, with the lack of a catalyst keeping activity choppy and two-sided, an analyst said.

 

In overnight electronic trading, Chicago Board of Trade March wheat slipped 3/4 cent to US$8.76 per bushel, while March Kansas City Board of Trade hard red wheat gained 3 1/4 cents to US$9.01 3/4.

 

Wheat trading should be choppy and two-sided, an analyst said. There are not many fresh inputs to move the market firmly in either direction. Argentina closed its wheat export registry for an additional 15 working days, but some participants had expected this and the impact on trading should be minimal, the analyst said.

 

Australia increased its wheat production estimate to 12.7 million metric tonnes from 12.1 million, which is slightly bearish, but it is not considered to have a major impact on the market, given what the country produces in a normal year, a trader said.

 

However, wheat may come under pressure if participants continue Monday's trend of buying corn and selling wheat, the trader said. It also looks like the hard red winter wheat belt may receive some light precipitation, which could alleviate some of the dry conditions in the region, the trader added.

 

In the U.S. hard red winter wheat belt, there is a chance for more significant precipitation during the next five to seven days, DTN Meteorlogix Weather said. Mainly dry conditions are expected Wednesday, with a chance for light precipitation in northeastern areas on Thursday. Light precipitation returns Friday with light to locally moderate precipitation possible Saturday through Monday, favoring northern and eastern areas, Meteorlogix Weather said.

 

On daily open auction technical charts, CBOT March wheat closed lower Monday, consolidating some of last week's rally. The stochastics and relative strength index are overbought and are hinting that a short-term top might be in or is near, a technical analyst said. If March extends last week's rally, US$9.15 1/2 is the next upside target. A close below the 10-day moving average at US$8.46 1/4 would be a sign that a short-term top has been posted, the analyst said.

 

March KCBT wheat also closed lower in consolidation, with technical indicators suggesting sideways to higher prices are possible near-term, the analyst said. If March extends last week's rally, US$9.50, the contract high is the next target. A close below the 10-day moving average of US$8.64 3/4 would confirm a short-term top has been set.

 

Deliveries posted against the CBOT December wheat future were 878 contracts Tuesday. Large issuers included the customer account of Kottke, which issued 350 contracts, and the customer account of Man Professional Clearing, which issued 217 contracts. Large stoppers included the customer account of Bear Stearns, which stopped 391 contracts, and the customer account of Fortis, which stopped 323 contracts. The last trade assigned was Nov. 30.

 

In other wheat news, Jordan bought 50,000 metric tonnes of Syrian wheat and plans to buy up to 600,000 tonnes in 2008. Wheat output in the U.K. could increase by 20% in 2008 on an increase in wheat seedings and a return to normal yields, a wheat consultant said.