December 11, 2007

 

US Wheat Outlook on Tuesday: Firmer on technicals, tighter US stocks

 

 

Technical support and a decline in U.S. ending stocks are expected to push U.S. wheat futures higher at the start of Tuesday's day session, analysts said.

 

Chicago Board of Trade March wheat is called to start 3 to 6 cents per bushel higher. In e-cbot overnight trading, CBOT March wheat ended up 3 3/4 cents at US$9.33 1/4.

 

Wheat should see some early, follow-through technical buying after rising in the overnight session, an analyst said. Nearby Kansas City Board of Trade and Minneapolis Grain Exchange contracts set all-time highs Monday, which boosted technical strength after recent rallies, he said.

 

The U.S. Department of Agriculture added some fundamental strength to wheat's storyline by lowering its estimate for 2007-08 U.S. ending stocks, an analyst said. The agency's December supply/demand report lowered stocks 32 million bushels to 280 million bushels, which would be the lowest level in 60 years.

 

The USDA raised its estimate for world wheat ending stocks slightly to 110.1 million tonnes from 109.8 million in November.

 

"With (U.S.) wheat stocks at 60-year lows, it's surprising the USDA did not raise U.S. exports by more than 25 million bushels as world exporters don't have the supplies to meet global demand," said Joe Victor, vice president of marketing for Allendale. "This shows us we need higher prices for economic rationing of demand."

 

The trade was largely expecting the USDA to drop its stocks estimate below 300 million bushels, and the decline might already be factored into the market, said Mike Zuzolo, analyst for Risk Management Commodities. Now that the report is out, the markets may turn back toward watching technicals and new-crop weather, he said.

 

Winter wheat in the U.S. central and southern Plains is being hit by a major winter storm system, with a mix of rain, snow and ice covering the region Tuesday, according to DTN Meteorlogix. The worst conditions will be felt from Kansas north to Nebraska and Iowa, and east across Missouri and Illinois.

 

"Ice storm damage has already been notable in Oklahoma," Meteorlogix said. "The ice accumulation may also hurt winter wheat due to a smothering effect on plant material."

 

Following the stormy weather pattern of this week, winter wheat areas in the Plains will continue to lack protective snow cover going into the last half of December, Meteorlogix said. That places the plants in a vulnerable situation in the event of a new cold-weather outbreak.

 

There is not much other fresh news out for the markets, besides the report.

 

Japan said it was seeking 170,000 metric tonnes of wheat, including 125,000 from the U.S., in a routine tender to be concluded Thursday. The entire shipment is expected to arrive Jan. 16 to April 5.

 

The 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 solid support at US$9.00.

 

First resistance is seen at Monday's high of US$9.49 and then at US$9.66 1/2. First support lies at Monday's low of US$9.26 and then at US$9.11 1/2.

 

At the KCBT, bulls' next upside price objective is pushing and closing March wheat above solid resistance at today's contract high of US$9.78, the analyst said. The bears' next downside objective is closing prices below solid technical support at US$9.00.

 

First resistance is seen at Monday's high of US$9.78 and then at US$10.00. First support is seen at Monday's low of US$9.57 and then at US$9.50.