December 28, 2006

 

US Wheat Outlook on Thursday: 2-3 cents firmer start on overnight gains

 

 

U.S. wheat futures are expected to start Thursday's day session firmer with momentum from stronger prices overnight and spillover support from firmer neighboring markets, sources said.

 

Benchmark Chicago Board of Trade March wheat is called to open 2 to 3 cents higher per bushel.

 

In e-cbot overnight electronic trade, CBOT March wheat was up 2 3/4 cents at US$5.09 3/4.

 

CBOT corn and soybeans also were higher overnight and will lend support to wheat if they hold their gains during the day session, sources said.

 

Fund buying also could determine wheat's path during the day session, a CBOT floor trader noted. Fund buying interest supported recent price run-ups but was absent Wednesday, when prices tumbled to a lower close.

 

Overall, trading is expected to be choppy and thin ahead of the end of the month and year, sources noted.

 

There is little fresh fundamental news out to steer prices, the floor trader said.

 

"There's nothing to get excited about," he said. "I don't see anything out there."

 

In India, trading companies are planning to export wheat from the next harvest provided that global prices continue to stay firm or rise from current levels, a senior official of an international trading house said Thursday.

 

India imported close 6.3 million tonnes wheat in 2006 on a decline in production and government stocks. India was a net exporter of wheat between 2001 and 2005.

 

A government official, however, said India may ban exports of wheat to ensure ample local supplies.

 

Reviewing activity from Wednesday, a technical analyst noted CBOT March wheat pushed sharply lower as bulls were unable to defend the rally of the previous two sessions. Prices may test the level of first support at around US$5.05, he said.

 

Key upside resistance for CBOT March wheat lies at US$5.21 1/2 and then US$5.25. On the downside, a break through a floor at US$5.05 could open the door to retest old gap support at US$4.97, he added.

 

Kansas City Board of Trade March wheat also ended weaker Wednesday and has short-term bearish momentum "in the wake of the failure from the US$5.25 level, which nearly coincided with 40-day moving average resistance," the technical analyst said.

 

Upside resistance for KCBT March wheat lies at US$5.17 to US$5.18 and then US$5.25. First support lies at US$5.11 and then US$5.07 1/2.

 

There are some bearish weather forecasts for areas that grow hard red winter wheat, which is traded at KCBT, a source noted. In the U.S. Southern Plains, moderate to heavy precipitation will continue to recharge soil moisture for HRW wheat, according to the DTN Meteorlogix weather firm.

 

Wheat in the eastern Midwest also should see rainfall to maintain soil moisture, the firm added. The crop, however, is vulnerable in the event of an unexpected change to cold weather, Meteorlogix said.

 

In China, no significant moisture or cold weather is forecast for wheat areas this week, the weather firm reported.

 

Any shower activity in Argentina during the next five to six days will be light, the firm said. Temperatures at above-normal levels will reduce soil moisture, although cooler conditions and showers are seen after the three-to-five-day period, Meteorlogix added.

 

Argentina will see grain export revenue increase by 15% in 2007 from this year, the result of a bigger harvest and soaring global commodities prices, according to a press report that cites a private estimate.

 

Argentina will produce 86 million metric tonnes of grains in 2007, up from 80.6 million in 2006 but down from 88.5 million in 2005, according to Argitrend, an agriculture consulting firm. The country will have 65.1 million tonnes of grain available for export in 2007, up from 60 million in 2006 but down from 66.5 million in 2005, the company said.

 

Argitrend did not provide a breakdown by agricultural product, although Argentina is a leading producer and exporter of corn, soybeans and wheat.