December 10, 2007

 

US Wheat Outlook on Monday: Solidly higher on follow-through buying

 

 

U.S. wheat futures are expected to start Monday's day session sharply higher on follow-through technical buying from a limit-up rally Friday and on fears about shrinking global supplies, floor traders said.

 

Chicago Board of Trade March wheat is called to start 15 to 18 cents per bushel higher. In e-cbot overnight trading, CBOT March wheat soared 16 3/4 cents to US$9.38 1/4.

 

Wheat futures at all three U.S. exchanges Friday rallied limit up, 30 cents higher, and the markets will see carryover technical buying Monday, traders said. Minneapolis Grain Exchange December wheat futures should continue to lead the upside amid concerns about tight spring wheat stocks, they added.

 

There are also renewed concerns about low world wheat supplies thanks to solid demand, traders said. India's State Trading Corporation floated a tender Monday for up to 350,000 metric tonnes of wheat, which was bullish, an analyst said.

 

The last date for submitting bids for the Indian tender is Dec. 17, and bids will be opened on the same date. The wheat is to be delivered by April 15, according to a tender document.

 

The U.S. is not expected to sell any wheat to India due to disagreements over quality requirements. However, a large purchase from India will drain world stocks even further, an analyst said.

 

The U.S. Department of Agriculture's December supply/demand report, due out at 8:30 a.m. Tuesday, is expected to trim estimates for U.S. and world stocks, analysts said. The average of analysts' estimates for 2007-08 U.S. wheat carryout is 296 million bushels, down from 312 million in November, according to a Dow Jones Newswires survey of 13 analysts.

 

Bulls' next upside price objective is to push and close CBOT March wheat above solid technical resistance at the contract high of US$9.66 1/2, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below psychological support at US$9.00. First resistance is seen at US$9.25 and then at US$9.30. First support lies at US$9.11 1/2 and then at US$9.00.

 

At the Kansas City Board of Trade, bulls' next upside price objective is pushing and closing prices above major psychological resistance at US$10.00. The bears' next downside objective is closing prices below psychological support at US$9.00. First resistance is seen at US$9.75 and then at US$10.00. First support is seen at US$9.39 and then at US$9.28.

 

In China, wheat prices were mostly steady in the week to Monday, but traders said rising sales from the state reserves began to weigh on prices in some regions. Prices of average-quality wheat in Henan province, a major production base in central China, were quoted around RMB1,620 a metric tonne, little changed from a week earlier.

 

China sold a total of 2.78 million tonnes of wheat out of its planned 3.5 million tonnes last week, and another 4.5 million tonnes are set to be auctioned this week. The government bought 71 million tonnes of wheat in 2006 and 2007 under the minimum purchase price program, which means it still has plenty reserves to regulate market prices to their desired level, an analyst said.