December 6, 2006

 

US Wheat Outlook on Wednesday: Starts 6-8 cents lower on weak overnight tone

 

 

U.S. wheat futures are expected to start Wednesday's day session lower on follow-through weakness from overnight trading and with no fresh news to attract aggressive buyers, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 6 to 8 cents per bushel lower.

 

In e-cbot overnight trade, CBOT March wheat was down 7 1/4 cents at US$5.10.

 

Trading will likely be choppy in the absence of strong market influences, sources noted.

 

Spillover strength from neighboring markets could support wheat during the day session as wheat has been looking to CBOT corn and soybeans for direction, a CBOT floor trader said.

 

Fresh fund buying also could support wheat futures, the trader added.

 

"We'll see what the funds want to do," he said.

 

Iraq has tendered for 100,000 metric tonnes of optional origin wheat for March delivery with the tender closing Dec. 9, according to reports.

 

U.S. futures prices, however, haven't seen any support from the news, CBOT floor sources said. There is continued disappointment over the pace of export business amid tightened global supplies, they said.

 

"Our exports are lagging," a source said. "We need them to turn around."

 

CBOT March wheat Tuesday closed slightly lower and is still in a well-defined two-month-old down-trending channel on the daily bar chart, a technical analyst noted. A solidly higher close Wednesday would negate the channel, he added.

 

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 this week's high of US$5.19 1/2 and then at US$5.25, he said. First support lies at Tuesday's low of US$5.11 and then at US$5.08.

 

Deliveries posted against the CBOT December wheat contract Wednesday totaled 1,138 contracts.

 

Top issuers included Dorman Trading, which issued 330 contracts, and Dowd Wescott Group, which issued 196 contracts. Large stoppers included Dowd Wescott, which stopped 367 contracts, and the Astro Division of UBS Securities, which stopped 281 contracts.

 

Looking at the weather, there appears to be a chance for needed moisture across the southern belt of the U.S. Southern Plains during the early or middle part of next week, the DTN Meteorlogix weather firm reported.

 

Colder temperatures in the eastern Midwest, meanwhile, will keep development of the wheat crop slow for at least another three to four days, the firm said.

 

China should be dry or see only light precipitation, favoring the south, during the next five days, according to Meteorlogix. Soil moisture is short in the north as crops continue to enter dormancy, the firm said.

 

In Argentina, scattered showers will maintain mostly favorable conditions for developing crops.