August 14, 2008


US Wheat Outlook on Thursday: 10-15 cents up on follow-through, technical buys



Technical buying and spillover support from other markets are expected to push U.S. wheat futures higher at the start of Thursday's day session.


Chicago Board of Trade September wheat is called to open 10 to 15 cents per bushel higher. In overnight electronic trading, CBOT September wheat climbed 15 1/2 cents to US$8.65 3/4, while CBOT December wheat surged 15 1/2 cents to US$8.90 3/4.


Follow-through buying from limit-up rallies in grains and soybeans Wednesday should boost the markets, traders said. The daily limit for CBOT and Kansas City Board of Trade wheat is expanded to 90 cents from 60 cents, while the Minneapolis Grain Exchange limit remains 60 cents.


Wednesday's limit-up rally gave wheat a "firm signal" to the upside, FuturesTechs said in a research note. The market has seen volatile moves lately but maintained a largely sideways-lower trend, a trader said.


"After days of violently messing around with no firm direction, this should be enough to give us a shove higher that can take us back" to US$9.52 3/4 to US$9.55 in CBOT September wheat, Futures Techs said.


CBOT December wheat Wednesday hit a fresh five-week high on short covering and fresh speculative buying interest amid strong gains in neighboring and outside markets. The contract is trading above key technical levels, including its 45-day and 50-day moving averages, a trader said.


The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$8.40, the analyst said. Bulls' next upside price objective is to push and close December futures prices above major psychological resistance at US$9.00, he said.


First resistance is seen at US$8.90 and then at US$9.00. First support lies at US$8.55 and then at US$8.50.


"The bulls have regained the near-term technical advantage in wheat," the technical analyst said.


Demand for U.S. wheat continues to look solid, a trader said. The U.S. Department of Agriculture said export sales for the week ended Aug. 7 were 650,300 metric tonnes, within trade estimates of 400,000 to 750,000 tonnes.


In other news, Strategie Grains raised its E.U. soft wheat output forecast to 133.9 million tonnes, up 2.2 million tonnes from last month's estimate of 131.7 million tonnes, on production growth from western E.U. countries. However, the quality of wheat from different locations varies, reflecting the inconsistent protein content, Strategie Grains said.


"While world production is expected to reach an all-time high in 2008, many areas have quality concerns, with much of the harvest expected to be sent into feed channels," said Bryce Knorr, Farm Futures senior editor. "The slow pace of spring wheat harvest on the northern Plains, as well as lower than average protein, could also support the cash market here in the U.S. for hard wheat."


Cutting in the northern Plains has been delayed by wet weather. However, hot temperatures are expected to return to the region in the next five days, which will "favor maturing wheat and wheat harvesting," DTN Meteorlogix said.

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