December 22, 2006

 

US Wheat Outlook on Friday: Up 1-3 cents on stronger overnight tone

 

 

U.S. wheat futures are expected to start firmer Friday on carryover momentum from firmer trading action overnight and on Thursday, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 1 to 3 cents higher per bushel.

 

In e-cbot overnight electronic trading, CBOT March wheat rose 2 1/4 cents to US$5.05 1/2.

 

There was little news out overnight to direct prices, but fund buying that helped support wheat Thursday may reappear Friday, a CBOT floor source said. Wheat futures showed some fresh technical strength Thursday that also may continue to support prices, he added.

 

There may, however, be some profit-taking ahead of the holidays during the day session, a trader noted. There are ideas that wheat has "overstretched" its gains, he said.

 

Trading will likely be choppy and thin with fewer participants in the market ahead of Christmas, sources said. The CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange will close at 12:00 p.m. CST Friday and will be closed Monday in observance of Christmas.

 

CBOT March wheat prices on Thursday gapped higher on the daily bar chart and hit a fresh three-week high, a technical analyst said. The price action was a bullish upside "breakout" from a recent sideways trading range, he added.

 

The next downside price objective for the bears is closing CBOT March wheat below support at last week's low of US$4.78 1/2, the analyst said. The bulls' next upside price objective is to close prices above solid resistance at US$5.10.

 

First resistance is seen at Thursday's high of US$5.04 1/2 and then at US$5.10. First support lies at US$5.00 and then at Thursday's low of US$4.97.

 

Although KCBT March wheat prices also saw gains Thursday, bears still have some downside technical momentum, the analyst noted. A weekly high close on Friday, however, would give the bulls some fresh upside technical momentum, he said.

 

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.

 

First resistance is seen at Thursday's high of US$5.09 3/4 and then at US$5.16 1/2. First support is seen at Thursday's low of US$5.05 and then at US$5.00.

 

Looking at the weather, wheat in the U.S. Southern Plains will benefit from recent rains with no damaging cold weather in sight, the DTN Meteorlogix weather firm reported.

 

It is a similar story in the eastern Midwest, where showers and rain this week will maintain soil moisture for wheat and no significant cold weather is expected during the next seven days, Meteorlogix said.

 

In Argentina, it may turn drier and hotter next week, but the conditions should not be a problem for crops unless they persist beyond next week, Meteorlogix said.

 

Wheat in China will benefit from warm temperatures during the next five days, the firm said. Friday's long-range charts suggest a chance for rain in Chinese growing areas later next week, although no significant cold weather is in sight, Meteorlogix added.

 

Chinese grain traders turned moderately more bearish on wheat this week as the government continued to sell supplies from state reserves to the market through auctions, according to a weekly survey by China National Grains and Oils Information Center. The auctions were seen to be pressuring wheat prices, the center said.

 

In other news, around 400,000 hectares of land in India has shifted to wheat cultivation from rapeseed, an official said.

 

The Australian government, meanwhile, has approved a temporary liberalization of wheat export arrangements by permitting two companies to export outside a monopoly operated by AWB Ltd.

 

Wheat Australia Ltd. will be granted a permit covering 300,000 metric tonnes to Iraq, while unlisted Cooperative Bulk Handling Ltd. will be able to export 500,000 tonnes to Indonesia. Of the 46 applications received for export permits, these were the only two considered to be in the public interest, an official said.

 

AWB, which has held a long-term monopoly over Australia's bulk wheat exports, was stripped of its veto over exports by rivals in early December as part of a government response to AWB's role in an Iraqi kickbacks scandal.