September 11, 2008

 

US Wheat Outlook on Thursday: 6-8 cents down on technicals, carryover selling

 

 

U.S. wheat futures are poised to start Thursday's day session weaker on technical and carryover selling, with some position-squaring expected ahead of U.S. Department of Agriculture crop reports.

 

Chicago Board of Trade December wheat is called to open 6 to 8 cents per bushel lower. In overnight electronic trading, CBOT December wheat dipped 9 1/4 cents to US$7.16 1/2.

 

Bears still have the solid technical advantage in wheat after recent losses, a technical analyst said. Since the beginning of the month, CBOT December wheat has already lost 75 1/2 cents, or about 9.4%.

 

However, traders may be reluctant to push the markets too hard to the downside after the sell-off and ahead of the USDA reports, a trader said. Wheat could see a boost from some short-covering and position-squaring, he said.

 

The USDA at 8:30 a.m. EDT Friday is set to issue supply/demand and crop production reports, including data on U.S. wheat ending stocks and global wheat production. The reports will be more of an event for corn and soybeans than for wheat, due to uncertainty over the size of the row crops, an analyst said.

 

"I think the big show is going to be for the corn and the beans on Friday," the analyst said. "The wheat kind of comes as a little bit of an afterthought. Any help from those other markets will definitely be a positive for wheat."

 

Traders generally expect to see the USDA cut its forecast for Australia's crop, which was pegged at 25 million tonnes in August, due to lingering dryness in some areas. Rabobank Australia on Thursday estimated wheat production at around 21 million metric tonnes and warned the season remains "very much in the balance" after drought slashed output in 2007 and 2006. Other private estimates also have been below the USDA's projection.

 

Late jointing to early reproductive wheat in Australia's central and northern New South Wales and in southern Queensland will likely benefit from additional shower activity during the coming days, DTN Meteorlogix said in a forecast. However, vegetative to jointing wheat elsewhere in Australia will see only light showers, the private weather firm said.

 

In Argentina, which also needs rain for wheat, isolated showers of up to 0.63 inch occurred in La Pampa, Meteorlogix said. The next chance for showers is not until next Thursday, according to the firm.

 

In other news, weekly U.S. wheat export sales of 457,300 metric tonnes were seen as solid and slightly above trade estimates, which ranged from 250,000 to 450,000 tonnes. The sales were up 5% from the previous week but down 23% from the prior four-week average, according to the U.S. Department of Agriculture. Top buyers included Japan, which took 107,400 tonnes, the Philippines, which bought 79,600 tonnes, and Egypt, which bought 60,000 tonnes.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below psychological support at US$7.00, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at the August low of US$7.71, he said.

 

First resistance is seen at today's high of US$7.40 and then at US$7.50. First support lies at Wednesday's low of US$7.16 and then at US$7.00.