September 25, 2008

 

US Wheat Outlook on Thuesday: Down on follow-through, weak export news

 

 

Follow-through selling from the overnight trading session, weakness in outside markets and lackluster export demand are expected to weigh on U.S. wheat futures at the start of Thursday's day session.

 

Chicago Board of Trade December wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT December wheat dropped 3 3/4 cents to US$7.26 1/2.

 

Losses in crude oil should set a bearish tone for the grains, as they have been eyeing the outside markets lately amid turmoil in the financial markets, an analyst said. Traders continue to watch for signs of progress in the U.S. government's US$700 billion rescue plan for banks.

 

There is not much bullish fundamental news out for wheat, as Egypt's General Authority for Supply Commodities booked 120,000 tonnes of Russian wheat in a tender and none from the U.S. The snub followed news Wednesday that Iraq had bought 100,000 to 200,000 tonnes of Russian wheat and none from the U.S.

 

The Black Sea region has been aggressive with its export sales and will likely remain as it works to move out its crop, a CBOT trader said. The U.S. has faced a freight disadvantage compared to the Black Sea, he said.

 

Weekly U.S. wheat export sales were below expectations at 284,300 tonnes, a marketing-year low. Analysts had expected sales for the week ended Sept. 18 to be 400,000 to 500,000 tonnes.

 

Weekly hard red spring wheat sales were 129,000 tonnes of the total, while hard red winter wheat sales were 36,200 tonnes. Soft red winter wheat sales were 97,200 tonnes, according to the U.S. Department of Agriculture.

 

Despite the lower-than-expected weekly export sales, the U.S. has seen solid demand lately, a trader said. There is a lot of business being done in the world, but the U.S. needs to see more, he said.

 

Heavy rains are disrupting the planting of winter grains in Ukraine, according to the agriculture ministry. Farmers had seeded grains on 1.6 million hectares as of Sept. 23, compared to 3 million hectares on the same date last year, it said.

 

In Argentina, scattered showers and thundershowers are possible through La Pampa and across southern Buenos Aires during the next few days, DTN Meteorlogix said. There appears to be a fair-to-good chance for significant showers through West Australia's wheat belt Thursday and Friday, the private weather firm said.

 

In other news, Japan this week didn't hold its weekly wheat tender for the second week in a row.

 

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$7.15, a technical analyst said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at Wednesday's high of US$7.60, he said.

 

First resistance is seen at US$7.40 and then at US$7.50. First support lies at Wednesday's low of US$7.23 1/4 and then at this week's low of US$7.15.