December 26, 2006

 

US Wheat Outlook on Tuesday: 1-3 cents firmer on carryover strength

 

 

U.S. wheat futures are expected to start Tuesday's day session firmer on carryover strength from last week and with support from neighboring markets, sources said.

 

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

 

Grain futures did not trade on the overnight e-cbot because of the Christmas holiday.

 

CBOT March wheat prices, however, settled Friday near the session high, at the weekly high close and at a fresh three-week high, a technical analyst noted. Last week's price action was a bullish upside "breakout" from recent sideways trading, he said.

 

Some follow-through fund buying from Friday should appear Tuesday, a CBOT floor source said. He noted there is a lack of fundamental news out to direct prices but that wheat has shown recent technical strength.

 

Spillover support from firmer CBOT corn prices also may give wheat a boost, the source added.

 

The bulls' next upside price objective is to close CBOT March wheat prices above solid resistance at US$5.25, the technical analyst said. The next downside price objective for the bears is closing prices below support at the December low of US$4.78 1/2.

 

First resistance is seen at Friday's high of US$5.15 and then at US$5.20. First support lies at US$5.10 and then at US$5.05.

 

Kansas City Board of Trade March wheat prices also settled Friday at the weekly high close and hit a fresh two-week high, the analyst added.

 

The bulls' next upside price objective is closing KCBT March prices above solid technical resistance at US$5.30. The bears' next downside objective is closing prices below solid support at last week's low of US$4.98.

 

First resistance is seen at Friday's high of US$5.18 3/4 and then at US$5.25. First support is seen at US$5.15 and then at Friday's low of US$5.07 1/2.

 

Looking at the weather, another strong upper level low pressure system will lead to another round of moderate to heavy precipitation in the U.S. Southern Plains, DTN Meteorlogix reported. The moisture will "continue to recharge soil moisture for wheat," the weather firm added.

 

In the eastern Midwest, more rain and more warm temperatures this week will favor wheat but also leave the crop vulnerable if the weather turns cold, Meteorlogix said.

 

Argentine wheat regions should see a period of hot weather, although it is not expected to last more than three to five days before rain returns, Meteorlogix noted.

 

In China, wheat regions should not see any significant cold weather or precipitation this week, Meteorlogix reported.

 

China's wheat imports in November were 29,273 tonnes, down 67% on year. The government said Tuesday it would reduce some import tariffs on some products starting Jan. 1 as part of a commitment to the World Trade Organization but impose a quota management system on wheat.

 

In India, meanwhile, wheat plantings as of Dec. 22 are estimated at 25 million hectares, up from 21.8 million hectares in the year-earlier period, according to the latest government data. The planting is almost complete as 26 million hectares are usually farmed for wheat.

 

If India decides to import or export wheat next year, planting progress is one of the main factors on which India's 2007 wheat trade will depend on. Farmers in India have shifted toward planting grains in anticipation of higher incomes.