December 26, 2007

 

US Wheat Outlook on Wednesday: New-crop seen gaining on nearby months

 

 

U.S. wheat futures are poised to start Wednesday's day session steady to firmer, with deferred months expected to gain on nearby contracts, analysts said.

 

Benchmark Chicago Board of Trade March wheat is called to open flat to 1 cent per bushel higher. New-crop contracts are called to open 2 to 4 cents higher amid expectations that spreads will correct and some concerns about developing plants, analysts said.

 

Old-crop contracts are trading at a sharp premium to the new crop, and there are ideas that bull spreads will continue to unwind, a CBOT floor trader said. That would pressure nearby contracts and boost deferred months.

 

Bearish ideasthat demand for U.S. wheat is slowing should also weigh on the nearby months, although strength in the neighboring CBOT corn and soybean markets could add some support, the floor trader said.

 

CBOT March wheat prices closed lower for the third session in a row Monday. In the short term, the market remains under the influence of a bearish key reversal day Dec. 17, a technical analyst said.

 

"Daily momentum tools have turned solidly lower from overbought levels," the analyst said. "The market's rally from mid-November to the Dec. 17 contract high was basically straight up, with little time off for the bulls to pause or consolidate. Near term, a minor technical correction has gripped the market and additional downside probing and or sideways consolidation is likely."

 

For bulls to regain the upper hand in the near term, CBOT March wheat needs to push above the Dec. 19 high at US$9.79, the technical analyst said. On the downside, the market is vulnerable to additional corrective pullback with initial targets seen at US$9.14 1/2 and US$9.09, he said.

 

First resistance is seen at US$9.45 and then at US$9.79. First support lies at US$9.14 1/2 and then at US$9.09.

 

At the Kansas City Board of Trade, the bulls need to push the March contract back above the US$9.95-to-US$10 zone to regain near term control, the analyst said. On the downside, the market is vulnerable to a test of next support at the US$9.50 to US$9.48 region, he said.

 

First resistance is seen at US$9.95 and then at US$10. First support is seen at US$9.50 and then at US$9.48.

 

For new-crop July contracts, there could be some fundamental support from concerns about areas of the U.S. Plains that aren't yet covered with snow, said Terry Reilly, analyst with Citigroup. Plants could suffer some damage if cold weather hits the region next week, a trader said.

 

DTN Meteorlogix said forecasters were watching a surface high pressure system expected in the central and southern Plains early next week. For now, it doesn't appear to be cold enough to cause damage to wheat, the private weather firm said.

 

In the U.S. eastern Midwest and Delta, moderate precipitation during the next five days will maintain high available soil moisture through wheat areas, Meteorlogix said. Longer range charts show a drier period coming up, the firm said.

 

In other news, the U.S. Department of Agriculture said 120,000 tonnes of U.S. soft red winter wheat was sold to unknown destinations for delivery in 2008-09. That should be supportive to new-crop wheat, a trader said.

 

The USDA is slated to release its weekly export inspections report at 11 a.m. EST Wednesday.