August 7, 2008

 

US Wheat Outlook on Thursday: Seen 10-15 cents higher on rebound, demand

 

 

Short-covering and bullishness about world demand are expected to yank U.S. wheat futures higher at the start of Thursday's day session.

 

Chicago Board of Trade September wheat is called to open up 10 to 15 cents per bushel. In overnight electronic trading, CBOT September wheat jumped 17 cents to US$7.82 3/4, and CBOT December wheat rose 16 3/4 cents to US$8.07 1/2.

 

The grain markets are rebounding after sliding Wednesday amid ideas that losses were overdone, a CBOT floor analyst said. Wheat should feel spillover strength from bounces in CBOT corn and soybeans, which are called to open firmer after trading higher overnight, he said.

 

Demand continues to look supportive for U.S. wheat. Weekly U.S. wheat exports sales were 682,600 metric tonnes, at the high end of expectations, which ranged from 400,000 to 700,000 tonnes.

 

Sales for the week ended July 31 were down 6% from the previous week but up 1% from the prior four-week average. Top buyers included Iran, which took 140,700 tonnes, Nigeria, which bought 132,500 tonnes, and Mexico, which bought 102,500 tonnes.

 

"We had excellent export sales," said Joe Victor, vice president of marketing for Allendale. "We're in a demand phase for wheat. That is truly supportive for this market."

 

In other export-related news, Iraq said three vessels holding 152,110 tonnes of hard wheat purchased from the U.S. and Canada delivered their shiploads at Umm Qasr port in the south of the country. The ministry said the wheat shipments, including at least 100,000 tonnes from the U.S., were from previous purchases the Iraqi Grain Board concluded in recent months.

 

Strength in outside markets, such as crude oil, should help the grains recover from Wednesday's setback, traders said. Nevertheless, a six-week-old downtrend is still in place on the daily bar chart for CBOT December wheat, a technical analyst said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at the May low of US$7.68, the analyst said. The bulls' next upside price objective is to push and close December futures prices above solid technical resistance at this week's high of US$8.31 1/2, he said.

 

First resistance is seen at US$8.00 and then at US$8.10. First support lies at Wednesday's low of US$7.76 and then at this week's low of US$7.71.

 

Looking at the weather, spring wheat on the U.S. northern Plains should have favorable harvest weather through Sunday, DTN Meteorlogix said. Scattered showers and thunderstorms next Monday will cause some disruptions, the private weather firm said.

 

Dry conditions or just a little light rain is expected during the next seven days in Argentina. More rain would benefit crop planting, emergence and development, especially in northern portions of the central grain belt, Meteorlogix said.

 

Australia, meanwhile, should see episodes of scattered light rain favoring southeast areas during the next five days, Meteorlogix said. Temperatures are projected to be near to below normal, the firm said.

 

Western Australia's Department of Agriculture & Food raised its wheat production estimate to 7.1 million tonnes, up 11% from an estimate a month earlier of 6.4 million tonnes. In 2007, the state produced 6.1 million tonnes due to drought losses.

 

In South Australia, wheat production this year is estimated at 2.89 million tonnes, little changed from a month earlier. If achieved, the state's crop would be up 23% on actual output last year.