March 19, 2008

 

US Wheat Outlook on Wednesday: Seen down on overnight, awaiting Egypt

 

 

Overnight losses are expected to push U.S. wheat futures lower at the start of Wednesday's day session, although traders are waiting to see the results of an Egyptian tender.

 

Chicago Board of Trade May wheat is called to open 5 to 10 cents per bushel lower. In overnight electronic trading, CBOT May wheat dropped 6 1/4 cents to US$11.57 3/4.

 

Follow-through selling from the overnight, profit-taking and weakness in outside markets should weigh on wheat early, traders said. However, the results on Egypt's tender could take the edge off the carryover and spillover pressure, a CBOT trader said.

 

Egypt's state-owned General Authority for Supply Commodities is tendering to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment from April 21-30, on a free-on-board basis. Egypt, a major buyer on the world market, usually tenders for that amount and then buys more.

 

A breakdown of bids for the GASC tender indicates that Egypt could buy some U.S. soft red winter wheat, a CBOT floor trader said. It looks as though U.S. SRW wheat is competitive with French, he said.

 

There is also chatter about other business being done in the world. Iraq bought at least 150,000 tonnes of U.S. wheat, according to a media report.

 

Japan bought 92,000 metric tonnes of wheat, including 50,000 tonnes of U.S. dark northern spring wheat, in a routine tender concluded Wednesday. The shipment is expected to arrive between May 6 and June 10.

 

The bulls' next upside price objective is to push and close CBOT July wheat, which represents the new crop, above strong technical resistance at US$11.65, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at Tuesday's low of US$10.94.

 

First resistance is seen at US$11.50 and then at US$11.65. First support lies at US$11.15 and then at US$11.00.

 

At the Kansas City Board of Trade, bulls' next upside price objective is pushing and closing prices 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 US$12.00 and then at this week's high of US$12.25. First support is seen at Tuesday's low of US$11.40 and then at US$11.25.

 

Conditions in hard red winter wheat areas of the U.S. central and southern Plains should be drier during the weekend, except for a little light rain through south-central areas, DTN Meteorlogix said in a forecast. Wheat areas in the southwestern and far western Plains could still use more rain, the private weather firm said.

 

Very heavy rains likely mean flooding in the region from the southern Midwest through the northern Delta, Meteorlogix said. There is a chance that this region may start to dry out during the next six to 10 days, the firm said.