February 29, 2008

 

US Wheat Outlook on Friday: Weaker on profit-taking pullback

 

 

U.S. wheat futures are expected to start Friday's day session on the defensive as the markets continue to set back from high prices amid news that Egypt bought French wheat, analysts said.

 

Most-active Chicago Board of Trade May wheat is called to open 15 to 20 cents per bushel lower. In overnight electronic trading, CBOT May wheat slipped 14 1/2 cents to US$11.50 1/2.

 

Kansas City Board of Trade May wheat ended the overnight session down 19 1/4 cents at US$12.06 3/4. Minneapolis Grain Exchange May wheat finished down 36 cents at US$15.94 1/2.

 

Profit-taking should continue to weigh on prices following a run-up to record highs, analysts said. More volatile price activity is expected as there is a lot of uncertainty and emotion in the markets, they said.

 

"The recent extreme volatility is one clue of a topping process in wheat," a technical analyst said.

 

Egypt's state-owned General Authority for Supply Commodities said it bought 120,000 tonnes of French wheat in a tender. The news was not too surprising as GASC on Thursday confirmed it had changed its rules for importing wheat to allow for additional origins to be included.

 

GASC's decision to change the rules was particularly aimed at adding wheat from the European Union. French industry bodies had lobbied the GASC to ease restrictions on test weights and moisture content to help facilitate more sales to Egypt.

 

Friday was first notice day for the CBOT March wheat futures, and deliveries of 404 contracts were below expectations. Traders and analysts had predicted deliveries of 1,000 to 2,500 contracts.

 

CBOT bulls' next upside price objective is to push and close July wheat, which represents the new crop, above major psychological resistance at US$11.00, the technical analyst said. The next downside price objective for the bears is pushing prices below psychological support at US$10.00, he said.

 

First resistance is seen at US$11.00 and then at today's high of US$11.25. First support lies at Thursday's low of US$10.45 and then at US$10.00.

 

Floor traders were still talking about MF Global's announcement Thursday that it was taking a US$141.5 million loss from unauthorized trades in the CBOT wheat market by one of its representatives. The New York-based futures brokerage blamed the losses, which were incurred Wednesday morning, on a loophole in systems that limit the size of positions that can be taken.

 

At the KCBT, bulls' next upside price objective is pushing and closing July wheat above psychological resistance at US$12.00, the analyst said. The bears' next downside objective is pushing and closing prices below psychological support at US$11.00.

 

First resistance is seen at Thursday's high of US$11.90 and then at US$12.00. First support is seen at Thursday's low of US$11.19 and then at US$11.00.