May 9, 2007

 

US Wheat Outlook on Wednesday: 2-3 cents up on Egypt, pre-report positioning

 

 

U.S. wheat futures are expected to begin Wednesday's day session trading 2 to 3 cents higher per bushel amid support from an Egyptian tender and with market participants reluctant to press prices too much ahead of a government report coming out Friday, traders and analysts said.

 

In e-CBOT trading, Chicago Board of Trade July wheat gained 3 cents overnight to US$4.84.

 

CBOT July wheat closed 13 cents lower Tuesday, and there are some ideas the losses were overdone, a CBOT floor trader said. Wheat looks like it is due to bounce higher with corn, he added.

 

There also should be some position-squaring ahead of the release of a U.S. Department of Agriculture supply and demand report Friday, traders said. Anticipation for the report should limit selling interest as traders are concerned it could show significant yield loss from an Easter weekend freeze in U.S. wheat country, a technical analyst added.

 

The report, due out at 8:30 a.m. EDT, will include new estimates for U.S. all wheat productions, winter wheat production, 2006-07 ending stocks and 2007-08 ending stocks.

 

An Egyptian tender for U.S. wheat is seen as another friendly factor for futures, traders said. Egypt's General Authority for Supply Commodities said Wednesday it bought 115,000 tonnes of U.S. soft red wheat for delivery June 5-15. GASC also bought 120,000 tonnes of Russian or Kazakh wheat for delivery until June 30.

 

The Egyptian tender "should give us a little bit of a boost," a CBOT floor trader said. GASC last bought wheat March 20 when it purchased 144,000 tonnes of U.S. and Russian wheat.

 

The bulls' next upside price objective is to close CBOT July wheat above solid resistance at US$5.00, the technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$4.65.

 

First resistance is seen at Tuesday's high of US$4.86 1/2 and then at US$4.90. First support lies at Tuesday's low of US$4.79 and then at US$4.75.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing July wheat above solid chart resistance at US$4.90. The bears' next downside objective is closing prices below solid support at US$4.60.

 

First resistance is seen at Tuesday's high of US$4.79 and then at US$4.85. First support is seen at Tuesday's low of US$4.71 and then at US$4.69.

 

Looking at the weather, scattered rains in the U.S. Southern Plains will maintain wet field conditions, according to DTN Meteorlogix. Increased disease pressure is still possible, the weather firm said.

 

In central China, recent heat has increased stress to winter wheat but may be coming to an end today, Meteorlogix said.

 

Showers may help replenish soil moisture in the Ukraine during the next few days, but the activity would mostly be light and the overall weather pattern still features below normal rainfall, according to the firm. Wednesday's long-range charts suggest a return to above- normal temperatures for next week, Meteorlogix added.

 

In Europe, major winter wheat areas had additional rain yesterday, helping to recharge soil moisture for the crops after an extended period of dryness, the firm said.

 

Australia should stay mainly dry during the next seven days, Meteorlogix said. Rainfall is needed to help replenish soil moisture and irrigation for early winter wheat.

 

Australian producers have begun planting wheat across southern parts of the country, following rain in the right areas at the right time, said Murray Jones, chairman of grower lobby Grains Council of Australia. The "autumn break" in southern states is being reported as the best for a decade and could lead to record plantings in South Australia, with plantings also underway in Victoria and Western Australia, he said in a statement.

 

The Australian government's Bureau of Meteorology, meanwhile, said there is an elevated chance of a La Nina weather event, which could mean above-average rainfall in eastern Australia in coming months. The moisture could help spur a dramatic recovery in wheat production after a severe drought in 2006.