December 8, 2006

 

US Wheat Outlook on Friday: Seen 3-5 cents down on overnight, weaker corn

 

 

U.S. wheat futures are expected to start Friday's day session lower on momentum from weaker overnight activity and under pressure from neighboring markets, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel weaker.

 

In e-CBOT overnight trade, CBOT March wheat was down 5 1/4 cents at US$4.90 1/2.

 

CBOT corn and soybeans also were lower overnight, and their weaknesses will likely weigh on wheat futures, a CBOT floor trader said. Continued end-of-the year profit-taking by funds may further push wheat prices to the downside, he added.

 

If corn turns to the upside, however, wheat could follow, sources noted.

 

There is some fundamental news out to support wheat prices that will take a back seat to fund activity and any spillover influence from corn, sources said.

 

Japan said it bought 206,000 metric tonnes of wheat, including 110,000 tonnes of U.S. wheat, in a tender concluded on Thursday for shipment Jan. 16 to Feb. 15, an official said Friday. The purchase includes 56,000 tonnes of U.S. dark northern spring wheat, 49,000 tonnes of U.S. hard red winter wheat and 5,000 tonnes of U.S. western white wheat.

 

South Korean flour mills bought a total of 23,600 metric tonnes of U.S. No. 1 wheat in a tender concluded Friday, a trader in Seoul said. The shipment is expected to reach South Korea Feb. 10-March 10.

 

Still, traders are nervous that fresh long fund liquidation will pull prices to the downside, CBOT floor sources said. Trading is expected to be choppy, they noted.

 

CBOT bears still have some downside technical momentum even after CBOT March wheat closed near the session high, a technical analyst added. CBOT March wheat remains in a well-defined two-month-old down-trending channel on the daily bar chart, he said.

 

The next downside price objective for the bears is closing CBOT March wheat prices below support at US$4.70, which is the bottom boundary of the downtrend channel, the analyst said. Bulls' next upside price objective is to close prices above solid resistance at US$5.10.

 

First resistance is seen at US$5.00 and then at US$5.05. First support lies at US$4.90 and then at the November low of US$4.85, the analyst said.

 

Looking at the weather, there is a chance for heavy precipitation in the southeast U.S. Southern Plains during the five-to-seven-day period, the DTN Meteorlogix weather firm said. The eight- to 10-day period is more uncertain, the firm added.

 

In the eastern Midwest, wet weather may return early next week, but conditions should be warmer and drier during the weekend, Meteorlogix said.

 

A drier trend during the five-day period is seen in Argentina, although soil moisture should favor early development of summer crops, Meteorlogix said.

 

In China, crops continue to enter dormancy under a colder-than-normal pattern, the firm said. Precipitation chances during the next seven days are limited and mainly in the south, Meteorlogix noted.

 

In other news, Australia's Bureau of Statistics on Friday sharply lowered its estimate of the volume of wheat being held in storage facilities operated by the country's major bulk grain handling companies. Wheat is now estimated at 7.6 million tonnes, down from 9.8 million tonnes previously, the bureau reported.

 

India's wheat plantings so far since October have covered 20.7 million hectares, up from 16.92 million hectares a year earlier, according to new government data. Planting progress is one of the key factors India will use to decide whether to import wheat in 2007, sources said.

 

India's winter-sown crops are planted from October to December.