December 21, 2006

 

US Wheat Outlook on Thursday: 2-4 cents firmer on overnight, corn strength

 

 

U.S. wheat futures are expected to start Thursday's day session higher on firmer overnight trading and spillover strength from the neighboring corn market, sources said.

 

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

 

In e-CBOT overnight trade, CBOT March wheat was 4 cents higher at US$4.97 3/4.

 

Wheat futures also ended Wednesday's day session stronger, and some follow-through buying may appear early Thursday, CBOT floor sources said. Primarily, however, wheat will be looking to CBOT corn for direction, a CBOT floor trader added.

 

CBOT March corn posted gains overnight and should lead wheat higher, sources said.

 

"Wheat seems pretty content to follow corn," the trader said.

 

Otherwise, there is little fresh news out to influence wheat prices, an analyst said.

 

The U.S. Department of Agriculture announced export sales for the week ended Dec. 14 were 455,100 tonnes, which was within trade expectations of 350,000 tonnes to 600,000 tonnes.

 

The sales were 3% less than the previous week but 2% more than the prior 4-week average, according to the USDA. Major increases were reported for Japan, which bought 131,000 tonnes, and Egypt, which bought 114,000 metric tonnes.

 

Sales were 13,900 tonnes for delivery in 2007-08.

 

Japan said it bought 140,000 metric tonnes of wheat in a tender concluded Thursday for shipment Jan. 16 to Feb. 15. It included 38,000 tonnes of U.S. hard red winter wheat, 38,000 tonnes of U.S. dark northern spring wheat, and 14,000 tonnes of U.S. western white wheat, an official said.

 

The Taiwan Flour Mills Association, meanwhile, bought 48,000 metric tonnes of U.S. No. 1 wheat in a tender concluded Thursday, an association official said.

 

"It's routine business," the analyst said.

 

CBOT March wheat is in a well-defined two-month-old down-trending channel on the daily bar chart, but prices have been trading sideways for two weeks, which favors the bulls a bit, a technical analyst 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, he noted. The bulls' next upside price objective is to close prices above solid resistance at US$5.

 

First resistance is seen at last week's high of US$4.96 and then at US$5, the technical analyst said. First support lies at Wednesday's low of US$4.86 and then at US$4.83.

 

Bears have downside technical momentum at the Kansas City Board of Trade, he added.

 

The bears' next downside objective is closing KCBT March wheat prices below solid support at US$4.90. The bulls' next upside price objective is closing prices above solid technical resistance at last week's high of US$5.16 1/2, he said.

 

First resistance is seen at this week's high of US$5.06 1/2 and then at US$5.10. First support is seen at US$5 and then at this week's low of US$4.98, the technical analyst said.

 

In other news, a major winter storm system that hit the U.S. Plains is winding down, the DTN Meteorlogix weather firm reported. Major wheat areas will benefit from precipitation in any form, the firm said.

 

Winter wheat areas in the Plains had been dry, and the precipitation was seen as bearish, a CBOT floor trader said.

 

"The wheat got a good drink," he said.

 

In the eastern Midwest, showers and rain this week will maintain soil moisture for wheat, Meteorlogix said.

 

In Argentina, periodic scattered thunderstorm activity and warm-to-hot temperatures will favor developing crops, the firm said.

 

China should see seasonal temperatures and dry conditions in its wheat-growing areas that will mainly favor dormant crops, Meteorlogix noted.

 

In India, wheat stocks as of Dec. 1 have declined 27% compared with a year ago to 5.59 million metric tonnes, below the minimum buffer requirements set by the government, according to the latest government data. The stocks are down from a Nov. 1 estimate of 5.99 million tonnes and from 7.63 million tonnes a year ago, the data show.

 

India plans its imports of wheat on the basis of its stock levels. India's agriculture and food minister, however, said Wednesday that 1.5 million tonnes of imported wheat has yet to arrive in the country and that the prospects of the next local harvest are promising.