December 6, 2007

 

US Wheat Outlook on Thursday: 3-5 cents lower following overnight weakness

 

 

Overnight weakness and a lack of fresh bullish news are expected to weigh on U.S. wheat futures at the start of Thursday's day session, traders said.

 

Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel lower. In e-cbot overnight trading, CBOT March wheat fell 6 cents to US$8.79.

 

Weekly U.S. wheat exports were 367,400 tonnes, within trade estimates of 300,000 to 500,000 tonnes. The export sales were on the low end of expectations and are seen as "no big surprise" for the wheat markets, a CBOT floor trader said.

 

Statistics Canada, meanwhile, pegged 2007-08 all-wheat production at 20.054 million metric tonnes, down from 20.641 million in October. The projection was within trade estimates of 20 to 20.75 million tonnes.

 

Analysts were expecting a decrease, but the decline could still be seen as supportive as it will come out of the spring wheat exportable market, a CBOT floor trader said. In particular, the lower estimate should be supportive to Minneapolis Grain Exchange spring wheat futures, he said.

 

In other news, there is a good amount of routine export business being done, but no major, unexpected purchases have been announced, traders said. Japan said it bought 195,000 metric tonnes of wheat, including 150,000 tonnes from the U.S., in a routine tender concluded Thursday, with shipment expected from Jan. 16 to Feb. 15.

 

The Taiwan Flour Millers Association bought 77,500 metric tonnes of U.S. No.1 wheat from in a tender concluded Thursday. The first shipment will arrive in Taiwan Jan. 28 to Feb. 12, and the second will come Feb. 12-26.

 

Three South Korean flour mills - Daehan, Daesun and Samhwa - bought 24,900 metric tonnes of U.S. No. 1 wheat from trading house Cargill in a tender concluded Thursday. The shipment is expected to reach South Korea between March 15 and April 15.

 

Cargill also sold 43,100 tonnes of U.S. No. 1 wheat to four South Korean flour mills - Dongah, Daehan, Youngnam and CJ Corp. - in a tender concluded Thursday, a trader in Seoul said. The shipment is expected to reach South Korea from Feb. 1-28.

 

As expected, the volume of Australian wheat exports will slump this marketing year ending Sept. 30, 2008, reflecting the impact of lower production due to drought. Wheat exports are forecast at 7.0 million tonnes, compared with exports of 11.2 million tonnes last year, the Australian Bureau of Agricultural and Resource Economics said.

 

Traders are nervous with global supplies at low levels, and it does not take much to drive U.S. wheat futures higher, an analyst said. The markets closed mostly lower Wednesday, but they still have technical strength after recent gains, a technical analyst said.

 

The bulls' next upside price objective is to push and close CBOT March wheat above solid technical resistance at US$9.00, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at this week's low of US$8.66. First resistance is seen at US$9.00 and then at US$9.11 1/2. First support lies at Wednesday's low of US$8.72 and then at US$8.66.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing and closing March wheat above solid resistance at last week's high of US$9.28, the technical analyst said. The bears' next downside objective is closing prices below solid technical support at this week's low of US$8.88. First resistance is seen at this week's high of US$9.15 and then at US$9.28. First support is seen at US$9.00 and then at Wednesday's low of US$8.96.