December 7, 2007

 

US Wheat Outlook on Friday: 5-7 cents higher on demand, follow-through

 

 

U.S. wheat futures are expected to start Friday's day session stronger amid support from follow-through buying and global demand, with traders waiting for the results of an Egyptian tender.

 

Chicago Board of Trade March wheat is called to open 5 to 7 cents per bushel higher. In e-cbot overnight trading, CBOT March wheat rose 6 1/4 cents to US$8.97 3/4.

 

Egypt's state-owned General Authority for Supply Commodities is tendering to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Dec. 25 to Jan. 15, on a free-on-board basis. GASC, which often tenders for that amount and then buys more, issued the tender after Thursday's close.

 

GASC on Wednesday bought 60,000 tonnes of Russian wheat in a tender, and there is a good chance it will buy more from Russia on Friday, traders said. Egypt is not expected to buy U.S. wheat because it is more expensive, a trader said.

 

Even if GASC does not buy U.S. wheat, a large purchase will still be supportive because it will drain world supplies, which are already tight, analysts said.

 

India State Trading Corp., meanwhile, may buy up to 550,000 metric tonnes of wheat in its tender to be floated Monday, a senior government official said. The news is bullish for wheat, an analyst said.

 

India's PEC Ltd. bought 150,000 metric tonnes of wheat in its latest tender after officials said they had hoped to buy around 350,000 tonnes. The wheat was purchased from Australia-based trading company JK International at an average price of US$396 a tonne and will be delivered by March 15, official said

 

"There's a lot of business out there," a trader said.

 

Fears about tight spring wheat supplies should also continue to support Minneapolis Grain Exchange futures and lift prices at other exchanges, a CBOT floor trader said. MGE December wheat on Thursday became the first U.S. wheat future on any exchange to ever climb above US$10.

 

"MGE led us higher yesterday and will continue to lead us higher," a CBOT floor trader said.

 

In some bearish news, the Ukrainian government may allow the resumption of grain export Dec. 15 and not Jan. 1, 2008 as was planned earlier, Deputy Agriculture Minister Yury Luzan said Friday as quoted by the government press service. He said there was potential for grain export in Ukraine, with grain stocks being 22% higher than at the same time last year, and that export potential amounted to 3.8 million to 4 million tonnes.

 

Bulls still have the solid near-term technical advantage in the U.S. wheat markets, an analyst said. At the CBOT, last week's high of US$9.11 1/2 for the March contract is "very strong" overhead technical resistance, 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 Thursday's low of US$8.78 and then at US$8.72.

 

At the Kansas City Board of Trade, 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 Thursday's high of US$9.25 and then at US$9.28. First support is seen at US$9.15 and then at US$9.10.