December 13, 2007

 

US Wheat Outlook on Thursday: Up on follow-through, technical buying

 

 

U.S. wheat futures are poised to start Thursday's day session stronger on follow-through and technical buying, with support from bullish expectations about global demand, analysts said.

 

Chicago Board of Trade March wheat is called to open 5 to 7 cents per bushel higher. In e-cbot overnight trading, CBOT March wheat climbed 9 1/2 cents to US$9.50.

 

There should be carryover technical buying after wheat futures on Wednesday ended limit up in several contracts at all three exchanges, traders said. Nearby Kansas City Board of Trade and Minneapolis Grain Exchange December wheat contracts set new all-time highs Wednesday, which gave more power to bulls, they said.

 

MGE wheat has been a leader on the upside, so traders should watch the market closely, a technical analyst said. It very well could be a leader on the downside for the wheat futures markets, he said.

 

Bulls gained solid upside technical power at the CBOT on Wednesday to suggest a challenge of the late-September contract high of US$9.66 1/2 in the near term, the technical analyst said.

 

"The bulls still have the solid near-term technical advantage," he said.

 

Bullish expectations about global demand should also help lift prices, a CBOT floor analyst said. There is a good amount of business being done in the world and supplies are still tight, he said.

 

Weekly U.S. wheat export sales for the week ended Dec. 6 were 513,800 metric tonnes for the old crop and 3,000 tonnes for the new crop, which was at the high end of trade expectations. Major buyers of the old crop included South Korea, which took 186,700 tonnes, Japan, which bought 135,000 tonnes, and Mexico, which bought 77,700 tonnes.

 

The brisk pace of export business is supportive, the CBOT floor analyst said.

 

In related news, Japan said it bought 170,000 tonnes of wheat, including 125,000 tonnes from the U.S., in a tender concluded Thursday. The entire shipment is expected to arrive Jan. 16 to April 5.

 

European Union wheat exports need to rise in the second half of the 2007-08 marketing year to balance global supplies, an analytical report from Strategie Grains said Thursday. Currently E.U. wheat exports are hampered by a lack of competitiveness compared with Russian and Argentine origin wheat.

 

The rise in the export pace at the end of the winter will be bullish for E.U. prices, said Strategie Grain. This bullish phase would likely be triggered by a tightening of U.S. supplies.

 

European Union E.U. soft wheat output is projected to jump 15% on the year in 2008-09 to 129.3 million tonnes, according to Strategie Grains. Strategie Grains forecast France, Germany and the U.K. would have the largest increases in wheat output, as the major producers would all be recovering from last season's weather woes.

 

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, the 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 this week's high of US$9.49 and then at US$9.66 1/2. First support lies at US$9.21 1/2 and then at this week's low of US$9.11.

 

At the KCBT, the bulls' next upside price objective is pushing and closing March wheat above major psychological resistance at US$10.00. The bears' next downside objective is closing prices below solid technical support at US$9.50. First resistance is seen at Wednesday's high of US$9.81 3/4 and then at US$10.00. First support is seen at US$9.60 and then at US$9.50.