December 14, 2007

 

US Wheat Outlook on Friday: Firmer, despite canceled Egyptian tender

 

 

Technical momentum and follow-through buying are expected to carry U.S. wheat futures higher at the start of Friday's day session, although a firmer U.S. dollar and a canceled Egyptian tender may temper bullish enthusiasm, traders said.

 

Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel higher. In e-cbot overnight trading, CBOT March wheat was 8 1/2 cents higher at US$9.62.

 

Technical charts for wheat look strong after recent rallies, traders said. There are also ongoing concerns about tight global supplies, they said.

 

"Supplies are getting tighter every day," one CBOT floor trader said.

 

However, Egypt's state-owned General Authority for Supply Commodities canceled a tender Friday to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Jan. 5-20, on a free-on-board basis. The tender was canceled due to unsuitable prices, an official said.

 

The news may weigh on prices a bit, but it should not be seen as too bearish because Egypt still needs to buy the wheat at some point, a trader said. GASC also was not expected to buy U.S. wheat, said Vic Lespinasse, an analyst for Illinois Grain.

 

Despite the canceled tender, it makes sense to give wheat bulls the benefit of the doubt considering the market's recent strength, Lespinasse said.

 

"It's a juggernaut," he said of the wheat market.

 

It seems as though Egypt is trying to "talk down" wheat prices by canceling its tender, a CBOT floor broker said. Old-crop wheat futures ended firmer Thursday, with some contracts hitting all-time highs despite a weaker opening.

 

Thursday's volatile trade may have chased some people out of the market, the broker said. Trading should be "dicey" going into the weekend Friday, he said.

 

There could be further pressure on new-crop contracts from forecasts for wet weather in the U.S. Plains, which suffered from unfavorable dryness this autumn, traders said. The region was hit with precipitation earlier this week and could see more Friday, DTN forecasters said.

 

CBOT bulls' next upside price objective is to push and close March wheat above major psychological resistance at US$10.00, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at this week's low of US$9.09. First resistance is seen at Thursday's contract high of US$9.70 1/2 and then at US$9.80. First support lies at US$9.49 and then at Thursday's low of US$9.28.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing and closing prices above resistance at US$10.25. The bears' next downside objective is closing prices below solid technical support at this week's low of US$9.48. First resistance is seen at Thursday's contract high of US$10.03 and then at US$10.10. First support is seen at US$9.78 and then at Thursday's low of US$9.62.

 

In other news, India's wheat production for the marketing year that starts April 1, 2008, may touch the targeted 75 million metric tonnes if the weather remains favorable during the crop-growing stage, a senior government official said Friday. The government is hopeful that final wheat acreage will be around 27 million hectares, compared to last year's record of 28.4 million hectares, he said.