December 29, 2006

 

US Wheat Outlook on Friday: Flat 1 cent higher on modest overnight gains

 

 

U.S. wheat futures are expected to start Friday's day session flat to slightly higher after trading modestly firmer overnight and with possible support from strong corn and soybean export sales, sources said.

 

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

 

In e-cbot electronic overnight trade, CBOT March wheat was up 3/4 cent at US$5.05.

 

Weekly U.S. wheat export sales for the week ended Dec. 21 were 354,200 metric tonnes, the U.S. Department of Agriculture reported, putting sales on the low end of trade estimates. Analysts surveyed by Dow Jones Newswires said they had expected sales to fall between 350,000 tonnes and 550,000 tonnes.

 

The sales were 22% below the previous week and 25% under the prior four-week average, according to the USDA. The biggest buyers were Taiwan, which took 96,800 tonnes, and Japan, which bought 93,000 tonnes.

 

Export sales for corn and soybeans, however, were higher than expected, a CBOT floor trader noted.

 

CBOT corn is seen as the leader of wheat, and if corn rallies on the export news, it could tug wheat along with it, he said. Firmer CBOT soybeans futures prices also could lend support, the trader added.

 

"Wheat's a follower," he said.

 

Spillover strength from CBOT corn and soybeans kept wheat from moving sharply lower during Thursday's day session, a source said.

 

Instead, CBOT March wheat settled Thursday with modest losses as the market retreated to an old down-trending line on the daily chart, a technical analyst said.

 

Traders should monitor action at first support at US$5.03 carefully, the analyst advised. A break would open the door back to a test of old gap support at US$4.97, he said.

 

On the upside, first resistance for CBOT March wheat lies at Thursday's high at US$5.12, with the next important ceiling at US$5.21 1/2, the analyst noted.

 

Kansas City Board of Trade March wheat closed little changed Thursday after the market filled the opening gap lower from Dec. 27, he added.

 

"Markets like to fill gaps and short-term momentum remains bearish in the wake of the failure from the US$5.25 level, which nearly coincided with 40-day moving average resistance," the analyst said.

 

Upside resistance for KCBT March wheat lies at US$5.18 and then US$5.25. First support lies at US$5.08 1/2 and then US$5.05.

 

Wheat futures may see some bearish influence during the day session from a major winter storm expected to bring snow, freezing rain and thunderstorms to the U.S. Southern Plains Friday, Saturday and Sunday, sources said.

 

"Precipitation continues to recharge soil moisture for winter wheat and is favorable," the DTN Meteorlogix weather firm reported.

 

Rainfall in the eastern Midwest also should maintain soil moisture for wheat, the weather firm said. The crop is vulnerable, however, in the event of an unexpected change to cold weather, Meteorlogix noted.

 

Significant cold weather is still not expected for Chinese wheat areas during the next seven to 10 days, Meteorlogix noted. Any precipitation should be light and mostly confined to the southern areas, the firm said.

 

In Argentina, meanwhile, hot, dry weather will deplete soil moisture during the next three to four days, Meteorlogix said. Soil moisture is currently at adequate or surplus levels, however, and showers should arrive next week along with more seasonal temperatures, the weather firm added.

 

In other news, India's wheat plantings as of Dec. 29 are estimated at 26.4 million hectares, up from 24.7 million hectares in the year-earlier period, the latest government data showed Friday. The plantings of wheat so far have already surpassed the normal annual level of 26 million hectares and are still in progress.

 

Planting progress is one of the main factors on which the direction of India's 2007 wheat trade depends. Farmers in India have shifted toward planting grains and pulses instead of oilseeds in anticipation of higher incomes.

 

The CBOT, KCBT and Minneapolis Grain Exchange will close at noon CST Friday ahead of the New Year's holiday. The exchanges will also be closed Monday in observance of New Year's Day.

 

The CBOT is expected Friday to announce its plans regarding Tuesday's national day of mourning for the late president Gerald Ford. The CBOT closed for business on the day of president Reagan's funeral in 2004.

 

If the CBOT cancels trading Tuesday, however, it would create an unusual four-day break in trading due to the New Year's Day holiday on Monday.