October 24, 2007


US Wheat Outlook on Wednesday: Sharply lower on Russian tariff news



U.S. wheat futures are expected to start Wednesday's day session sharply lower on news that Russia has no immediate plans to hike its wheat export tariff, traders said.


Benchmark Chicago Board of Trade December wheat is called to open 14 to 16 cents per bushel lower. In e-cbot overnight trading, CBOT December wheat fell 16 cents to US$8.25.


Russia's economic development minister killed rumors that the government plans to raise its wheat export duty in the near future. Talk about the potential for an increase in the export duty to 30% or 50% from 10% boosted U.S. wheat futures last Friday and Monday.


CBOT December wheat prices Tuesday closed down the 30-cent limit amid disappointment that the rumors of an increase had not been confirmed. Russia's statement that it plans to maintain the 10% tariff for now should inspire follow-through selling, CBOT traders said.


A higher Russian export tariff was seen as bullish for U.S. wheat futures amid ideas that it would send more export business to the U.S., analysts said. Russia is an aggressive wheat exporter on the world market.


The Russian government will only raise the tariff after the country's grain export potential in the 2007-08 marketing year - estimated at 12 million metric tonnes - is exhausted, the agriculture minister said. The tariff is set to be charged Nov. 17 to April 30.


"I think the Russia news is the main thing for the trade today," a CBOT floor trader said.


Wet weather from southeast Europe to west Ukraine should favor growth of winter wheat, DTN Meteorlogix said. More rain is still needed for wheat areas of the east Ukraine and south Russia, the private weather firm said.


There is a chance for showers, thundershowers and some rain in Australia's New South Wales and southern Queensland Wednesday into Thursday, Meteorlogix said. Rainfall will favor summer crops and any late filling winter wheat but is unfavorable for maturing wheat and could delay the wheat harvest, according to the firm.


In Argentina, western and southern growing areas look to continue a recent drying trend for another five to seven days. The dryness reduces soil moisture for crops, especially over the southwestern wheat areas, Meteorlogix said. Long-range charts suggest a pick up in rainfall during the middle of next week.


More rain is still needed through southwest growing areas of the U.S. central and southern Plains for favorable pre-winter development of winter wheat, Meteorlogix said.


The bulls' next upside price objective is to push and close CBOT December wheat above solid resistance at US$8.83, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at last week's low of US$8.10. First resistance is seen at US$8.50 and then at US$8.60. First support lies at US$8.30 and then at US$8.20.


"Trading has turned volatile and choppy, which favors the bears at these higher price levels," the technical analyst said.


At the Kansas City Board of Trade, the bulls' next upside price objective is pushing and closing December wheat above solid resistance at Tuesday's high of US$8.94, he said. The bears' next downside objective is pushing prices below solid support at US$8.40. First resistance is seen at US$8.70 and then at US$8.80. First support is seen at Tuesday's low of US$8.58 and then at US$8.50.

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