September 5, 2008
US Wheat Outlook on Friday: 20-25 cents lower on technical selling, spillover
Technical selling and spillover pressure are expected to push U.S. wheat futures sharply lower at the start of Friday's day session.
Chicago Board of Trade December wheat is called to open 20 to 25 cents per bushel lower. In overnight electronic trading, CBOT December wheat fell 26 cents to US$7.51.
Carryover weakness from the overnight and weakness in CBOT corn and soybeans should weigh on wheat prices, traders said. Losses in outside markets like crude oil are expected to add to the bearish tone.
CBOT December wheat overnight was able to hold psychological support at US$7.50 but set a fresh low for the year of US$7.50 1/2. The previous 2008 low of US$7.56 1/4 was set in electronic trading Tuesday.
Wheat has seen a steep slide during the past two weeks following a spike on Aug. 21. As of Thursday's close, CBOT December wheat was down 24 1/4 cents on the week and US$1.82 1/2 from the Aug. 21 high of US$9.59 1/2.
The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at this week's low of US$7.56 1/4, a technical analyst said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at US$7.98 1/2, which would fill on the upside a downside price gap on the daily chart, he said.
First resistance is seen at Thursday's high of US$7.85 1/2 and then at US$7.98 1/2. First support lies at Thursday's low of US$7.71 3/4 and then at US$7.56 1/4.
"The bears still have the solid technical advantage," the analyst said.
Liffe's Paris milling wheat Friday dropped to fresh 13-month-low of EUR173.50/tonne in most-active November. Pressure stemmed from weakness in crude oil and metals, and the fall in overnight CBOT grains and oilseeds.
Weekly U.S. wheat export sales of 436,600 metric tonnes were above trade estimates of 100,000 to 350,000 tonnes. They were up 19% from the previous week, but down 33% from the prior 4-week average. Top buyers included Japan, which took 87,500 tonnes; the Philippines, which bought 70,700 tonnes; and Egypt, which bought 70,000 tonnes, according to the U.S. Department of Agriculture.
In Australia, winter crops, including wheat, "appear to be fairly well positioned" going into spring after widespread rainfall last weekend, Victoria state's Department of Primary Industries said in a monthly report. As for the southwest slopes of New South Wales, the department said the rain freshened the crops, but the outlook is uncertain as rain will be needed each week to keep up with increasing crop water use in the high-growth spring period. Moisture profiles are limited in depth in many fields.
Rainfall of 0.50 to 2.00 inches, with locally heavier totals, hit southern Queensland and northern New South Wales on Friday, DTN Meteorlogix said. Late jointing to early reproductive wheat in this area will "greatly benefit" from the precipitation, the private weather firm said.
Rain is needed to support favorable development of wheat in Argentina, especially through western crop areas. The region should be dry or see only a few light showers during the next seven days, Meteorlogix said.