December 27, 2006

 

US Wheat Outlook on Wednesday: 1-2 cents lower on weaker overnight tone

 

 

U.S. wheat futures are expected to start Wednesday's day trading session on the defensive after lower overnight action and with weakness seen in the neighboring corn market, sources say.

 

Benchmark Chicago Board of Trade March wheat is called to open 1 to 2 cents weaker per bushel.

 

In e-cbot overnight electronic trade, CBOT March wheat was down 2 1/4 cents at US$5.14 1/2.

 

CBOT March corn also was weaker overnight, and wheat will probably follow corn's movements in the day session, a CBOT floor trader noted. Fresh fund buying ahead of the new year also could boost wheat prices, he said.

 

CBOT March wheat settled firmer Tuesday but off early highs. That reveals a lack of conviction by the bulls, a technical analyst said.

 

"Tuesday's action also etched a sloppy type of bearish shooting star on the candlestick chart," the analyst said. "Tuesday's action revealed the bulls may need to rest short-term."

 

Key upside resistance lies at US$5.21 1/2 and then US$5.25.

 

On the downside, important short-term support lies at US$5.15-5.14. A break through that floor could signal a more serious downside attempt is underway, the analyst noted.

 

Kansas City Board of Trade March wheat prices mimicked CBOT wheat Tuesday, the analyst added. That reveals the bulls were unable to defend the intraday high at US$5.25, he said.

 

Key short-term resistance for KCBT March wheat lies at US$5.25 and then resistance at US$5.30.

 

Key short-term support lies at US$5.18. A push below US$5.18 would open the door for a retreat toward second resistance at US$5.16 1/2, the analyst said.

 

Overall, there is little fresh fundamental news out to direct wheat prices, sources noted.

 

Forecasts for moderate to heavy precipitation in winter wheat growing areas of the U.S. Southern Plains are considered bearish, but don't seem to be affecting trading, a source said.

 

Rain, along with some warmer temperatures, also is forecast for the eastern Midwest this week, the firm added. The conditions favor wheat but leave the crop vulnerable in the event of a turn to cold weather, Meteorlogix said.

 

In China, meanwhile, no significant precipitation or cold weather is predicted for wheat areas this week, according to Meteorlogix.

 

Argentina, however, should see a few thundershowers in the south during the next three to five days before they move northward. Some hot weather is also expected, although there are no significant concerns for the crops at this time, the firm reported.

 

In other news, Pakistan has allowed the export of 500,000 metric tonnes of wheat because of a better harvest this season and relatively high international prices, a senior government official said Wednesday. The government could export even more wheat depending on domestic and international market conditions, he added.

 

Pakistan currently has sufficient wheat stocks of close to 2 million tonnes, the official said.

 

Pakistan's wheat output remained at 21.7 million tonnes in the recently concluded season, and the government has set a target of 22.5 million tonnes for the 2006/07 wheat crop. The government banned wheat exports more than two years ago because of poor harvests and rising domestic prices.