December 12, 2007

 

US Wheat Outlook on Wednesday: Profit-taking expected to add pressure

 

 

Profit-taking is expected to weigh on U.S. wheat futures at the start of Wednesday's day session amid a lack of fresh bullish news, analysts said.

 

Chicago Board of Trade March wheat is called to open steady to 3 cents per bushel lower. In e-cbot overnight trading, CBOT March wheat finished 1/2 cent higher at US$9.11.

 

Traders will likely book some profits after recent rallies as there is no fresh bullish news out to cause them to chase the wheat markets higher, an analyst said. The markets ran out of steam Tuesday and will likely stumble again early Wednesday, he said.

 

"It looks like we need to settle back a little bit," a CBOT floor trader said.

 

Egypt's main wheat buyer, the state-owned General Authority for Supply Commodities, said it bought 30,000 metric tonnes of Russian wheat in a tender. The U.S. wasn't expected to win any of the business because prices are too high, but it was seen as a short-term "depressive factor" that GASC didn't take more off the world market, a trader said.

 

The wheat was purchased for February delivery on a free-on-truck basis, a GASC official said. Market chatter indicates the wheat was in store.

 

There are expectations Egypt will need to jump back in the market again soon to fulfill its needs, traders said. Last week, Egypt bought 115,000 tonnes of Russian wheat, and the bulk of it was for February delivery.

 

An estimate that French 2008-09 soft wheat plantings are up 3.4% on the year is somewhat bearish, an analyst said, although the increase is not seen as surprising. Traders expected producers to seed more wheat in response to high prices.

 

In the U.S., the central and southern Plains received a good shot of beneficial moisture from a winter storm this week, meteorologists said. The area has been too dry, and the favorable precipitation will likely way on new-crop July wheat futures, traders said.

 

In other news, the Canadian Wheat Board expects to sell over 1.0 million metric tonnes of wheat to India this year, according to a report. The Canadian Wheat Board sold 1.0 million tonnes of the grain to India last year and has already exported around 315,000 tonnes so far this year, it said.

 

Looking at technical charts, September's high of US$9.66 1/2 is the next upside target for CBOT March wheat, if the contract extends its recent rally, a technical analyst said. Closes below the 10-day moving average crossing around US$8.96 1/4 would signal that a short-term top has been posted, he said.

 

At the Kansas City Board of Trade, it will be difficult to project the upside target for the March contract if it extends Monday's breakout above October's high crossing at US$9.50, the technical analyst said. Closes below the 10-day moving average crossing around US$9.21 1/4 would signal that a short-term top has been posted, he said.