December 12, 2006

 

US Wheat Outlook on Tuesday: Firmer start following overnight gains

 

 

Overnight strength could underpin U.S. wheat futures Tuesday, with the market looking toward technical chart points and other outside influences due to a dearth of fresh fundamental news.

 

In overnight trade, wheat futures on the e-cbot electronic trading platform were firmer. Most-active March gained 3 cents to US$4.93 a bushel while spot December rose 1/2 cent to US$4.75 1/2.

 

March wheat is called to open 2 to 3 cents firmer.

 

U.S. wheat futures closed firmer Monday, supported by strength in soybeans and little selling interest. The firmer close, albeit on light volume, and overnight gains could at least have the market open in the black.

 

"I think we'll start a little firmer and rally, then pull back when we get some hedging or profit-taking," says one cash-connected floor source.

 

Because of the time of the year, the market is influenced by year-end book-squaring and other housekeeping duties. "My impression of all of the markets is if you want to talk about fundamentals, stop talking. We're not trading fundamentals right now in general. We come down to a little support and then we bounce back," the floor source said.

 

Another long-time grain market watcher said modest support might come from a weaker dollar, but admitted "it was no big deal." He expected a choppy trading with the market watching technical levels. Monday's close near the session high for CBOT March wheat after hitting a fresh two-month low early on came due to short covering, a technical analyst said.

 

Even with the bounce, bears still have some downside technical momentum as the contract is still in a well-defined two-month-old downtrending channel on the daily bar chart. Bearish traders' downside objective is a close below US$4.70 while the bulls' next upside price objective is a close above US$5.10, the analyst said.

 

March KCBT wheat is in a similar situation as CBOT, with bears in control. Their next downside objective for is a close below US$5.00. The bulls' next upside price objective is a close above resistance at US$5.25.

 

Weather in the U.S. Southern Plains remains very warm and dry for at least another five to six days, noted private meteorologist firm DTN Meteorologix. Beyond then there is some question for early next week. Tuesday's charts suggest heavier rain may be possible but mostly for the east and possibly for the north regions. However, the firm said, this heavier precipitation chance has shown up in different areas, including the southwest Kansas/Texas Panhandle feedlots/wheat areas for since Monday morning.

 

In Argentina, some hot weather is seen during the five day period but also some shower activity. There are no significant concerns at this time, the firm said.

 

Wheat deliveries against the CBOT December contract totaled 107 contracts. The biggest issuer was Man Financial Inc which issued 78. The Astro Division Of UBS Securities stopped 82. Kansas City Board of Trade December deliveries totaled 92 contracts, with Term issuing 91 of those. ADM Investor Services stopped all. There were no wheat deliveries scheduled for Tuesday at the Minneapolis Grain Exchange.

 

In other news, China will auction a total of 1 million metric tonnes of wheat Thursday, as part of the country's regular sales of wheat bought under the minimum purchase price program. Last week a total of 635,671 tonnes of wheat was sold through similar auctions.