December 20, 2007

 

US Wheat Outlook on Thursday: 4-6 cents lower on profit-taking, weak e-CBOT

 

 

U.S. wheat futures are expected to start trading 4 to 6 cents lower Thursday, pressured by profit-taking after Wednesday's gains and lower prices overnight, a commission house analyst said.

 

In overnight electronic trading, Chicago Board of Trade March wheat fell 7 1/2 cents to US$9.66 per bushel and Kansas City Board of Trade March hard red wheat declined 5 3/4 cents to US$9.89 1/4 per bushel.

 

Follow-through selling from the overnight session and profit-taking after Wednesday's gains should keep wheat on the defensive at the opening, the commission house analyst said. There is no fresh news out to support the market and the recent volatility has "beaten up" both the bulls and the bears and trading could be choppy, the analyst said.

 

Weekly export sales were on the low end of estimates and might also keep buying interest on the sidelines, a trader said. The U.S. Department of Agriculture reported weekly wheat export sales were 221,500 metric tons for the week ended Dec. 13, near the lower end of the 200,000 to 500,000 tons expected by analysts. The total included sales of 17,200 tons for delivery in the 2008-09 marketing year.

 

In addition, sales of soft red winter wheat were a negative 83,500 tons as buyers canceled 150,000 tons previously contracted.

 

There are no current weather issues around the world and the holidays are fast approaching, so trading interest is expected to slow, an analyst said. Japan did buy wheat, but the business was routine and should not have much impact. Japan bought 285,000 metric tons of wheat in its weekly tender, with 260,000 tons of the total a combination of U.S. varieties.

 

On daily open auction technical charts, CBOT March wheat closed nearer the session high on speculative bargain hunting. A bearish buying "exhaustion tail" on the daily chart has occurred this week, but strong upside price action on Thursday or Friday will likely negate this technically bearish development, a technical analyst said. Market bulls continue to have the technical advantage, with the next upside price objective closing prices above strong resistance at the contract high of US$10.09 1/2 per bushel. The next downside price objective for bears is closing prices below this week's low of US$9.47 per bushel.

 

First resistance is seen at US$9.79 - Wednesday's high - and then at US$9.90. First support is seen at US$9.55 and then at US$9.47.

 

March KCBT wheat also closed nearer the session high Wednesday. Price action this week has produced an "exhaustion tail," on the daily bar chart, though strong gains the rest of this week would likely negate that formation, the analyst said.

 

The next upside price objective in March remains pushing and closing prices above resistance at US$10.19 per bushel the contract and all-time high. The bears' next downside objective is closing prices below support at this week's low of US$9.66.

 

First resistance is seen at US$10.00 and than at US$10.03. First support is seen at US$9.80 and then at Wednesday's low of US$9.74.