December 23, 2008
US Wheat Outlook on Tuesday: Down as resistance and competition pressure
U.S. wheat futures are expected to slip on the open of Tuesday's trading day, in line with overnight losses.
Cheap foreign wheat also pressures a price drop if export business is to resume at significant levels.
Chicago Board of Trade March wheat is called to open 6 to 8 cents per bushel lower.
In overnight electronic trading, CBOT March wheat lost 8 1/2 cents to US$5.60 1/2. Kansas City March wheat shed 6 1/2 cents to US$5.82 3/4 and Minneapolis Grain Exchange wheat dropped 3 cents to US$6.30.
"Wheat prices settled just below this month's highs on Monday, but lacked sufficient strength to break above key overhead chart resistance," said Arlan Suderman, a Farm Futures market analyst. "Even so, open interest continues to climb in Kansas City, which is giving added momentum to Chicago and Minneapolis as well."
Still, "wheat prices are nearing significant overhead chart resistance, which traders are reluctant to test during thin holiday trade," Suderman added. "As such, we could see a pull-back today, unless a surprise fire ignites in one of the other markets."
Outside markets are mostly flat in thin, preholiday trade. Equities futures held steady as U.S. Commerce Depart reported Tuesday that third-quarter gross domestic product slipped at a 0.5% annual rate July through September. Analysts, on average, expected a 0.6% drop.
While bears maintain "the overall near-term technical advantage, the bulls have gained momentum" as the push to close above the last "reaction high" of US$5.78 a bushel, a market technician said.
Wheat bears are aiming close below "solid technical support" at US$5.35," he said, marking first support at Monday's low of US$5.57 1/2, then at US$5.50.
He marked first resistance at last week's high of US$5.75 1/2.
"Temperatures are expected to moderate across much of the winter wheat belt this week; following back-to-back weekends of frigid Arctic temperatures. Winterkill losses were likely limited to 5 to 10% of the belt, but we won't know for sure until spring approaches," Suderman said. "Showers should favor the eastern Plains this week, leaving western areas dry once again."
Mostly dry conditions are speeding the harvest of Argentina's drought-stressed crop, which is now ahead of last year's pace, said DTN Meteorologix.
In Australia, wet conditions continue to create an "unfavorable" environment for maturing wheat and "will likely delay the wheat harvest," the private weather firm said.
In global trading news, Egypt's state-owned General Authority for Supply Commodities will tender Tuesday to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Jan. 16-31 on a free-on-board basis, an official said Monday.
GASC is looking to purchase 55,000 to 60,000 tonnes of U.S. hard red winter wheat, U.S. soft red wheat, U.S. soft white wheat, Argentine wheat, Kazakh wheat or Canadian soft wheat, Nomani Nomani, undersecretary to the GASC vice chairman, told Dow Jones Newswires.
GASC is also looking for 25,000 to 60,000 tonnes of Russian, Ukrainian, U.K. or French milling wheat, he said.
"Egypt's order is expected to be filled with wheat out of the Black Sea and Europe, which have a freight advantage," analyst Suderman said. "As such, European prices pushed higher overnight, while U.S. prices slipped lower in an attempt to compete."
Argentine export taxes on wheat and corn will be lowered by five percentage points Tuesday and will be reduced even further if farmers increase output.
Wheat exports will now be taxed at 23%, while corn shipments will carry a maximum 20% export tax.
Export taxes will be reduced an additional percentage point for each million tonnes of corn and wheat produced over a fixed benchmark, Argentine President Cristina Fernandez said Monday.