December 20, 2006

 

US Wheat Outlook on Wednesday: 2-4 cents stronger on follow-through buying

 

 

U.S. wheat futures are expected to start Wednesday's day session higher on firmer overnight trade and with some support from strength in the neighboring corn market, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 2 to 4 cents per bushel higher.

 

In e-cbot trade, CBOT March wheat was up 2 3/4 cents to US$4.94 3/4.

 

Trading during the day session is expected to be choppy with early follow-through buying, sources said. There is little fundamental news for bulls to feed on, and end-of-the-year liquidation may pressure prices later, a CBOT floor trader added.

 

Strength in CBOT corn, however, could help boost wheat futures with spillover buying and interest, the trader said.

 

The next downside price objective for the bears is closing CBOT March wheat prices below support at last week's low of US$4.78 1/2, a technical analyst said. The bulls' next upside price objective is to close prices above solid resistance at US$5.00.

 

First resistance is seen at last week's high of US$4.96 and then at US$5.00. First support lies at US$4.85 and then at Tuesday's low of US$4.83, the analyst said.

 

At the Kansas City Board of Trade, the bears' next downside objective is closing March wheat prices below solid support at US$4.90, the analyst added. The bulls' next upside price objective is closing prices above solid technical resistance at last week's high of US$5.16 1/2.

 

First resistance is seen at Tuesday's high of US$5.06 1/2 and then at US$5.10. First support is seen at US$5.00 and then at Tuesday's low of US$4.98, he said.

 

A major storm system on Wednesday continues to hit winter wheat areas in the U.S. Plains with the heaviest activity shifting into the northern and eastern areas, according to DTN Meteorlogix weather forecast. Precipitation from the event will help to recharge soil moisture for wheat, especially in the very dry western locations, the weather firm said.

 

In the eastern Midwest, rain this week will maintain soil moisture for wheat, and no significant cold weather is seen during the next seven days, Meteorlogix said.

 

Dormant wheat in China will mainly benefit from seasonal temperatures and dry conditions there, the firm added.

 

In Argentina, periodic rains will maintain soil moisture for crops, but there may be some flooding with the rain, Meteorlogix said.

 

In India, meanwhile, 23.25 million hectares of wheat have been planted so far, compared to 21.0 million hectares a year ago, the agriculture minister said. Weather is favorable for sowing, he noted.

 

Expectations of a global increase in wheat production next year have already started to weigh on futures prices, a CBOT floor source said.

 

There is enough wheat available on the local market in India, and prices have started to decline, the minister said.

 

Of India's total contracted imports of 5.5 million tonnes, 4.0 million tonnes have already arrived and the remaining is expected to be delivered by second week of February, he added.

 

In other news, the Australian Taxation Office completed an audit of AWB Ltd., which holds a wheat export monopoly in Australia, and found the company didn't pay bribes in relation to the United Nations oil-for food program, officials said.

 

A separate yearlong inquiry into kickbacks paid to Saddam Hussein's former regime in Iraq, however, has found AWB may have broken several Australian laws, including criminal and banking codes, by making payments to the Iraqi regime between 1999 and 2003 in breach of U.N. sanctions.