November 12, 2007

 

US Wheat Outlook on Monday: Down 5-7 cents on weaker outside markets, e-CBOT

 

 

U.S. wheat futures are expected to start Monday's day session lower on overnight weakness and setbacks in outside markets, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 5 to 7 cents per bushel lower. In e-cbot overnight trading, CBOT December wheat fell 6 1/4 cents to US$7.55 3/4.

 

Crude oil and metals were lower overnight, and the grains should follow the outside inflationary markets, CBOT floor traders said. Bears also still have downside technical momentum in the wheat markets, a technical analyst said.

 

A six-week-old downtrend line remains in place on the daily bar chart, the technical analyst said. The bulls' next upside price objective is to push and close CBOT December wheat above psychological resistance at US$8.00, he said. The next downside price objective for the bears is pushing and closing prices below solid support at Friday's low of US$7.45.

 

First resistance is seen at Friday's high of US$7.64 and then at US$7.70. First support lies at US$7.50 and then at US$7.45.

 

Trading may be choppy, with some market participants taking the day off for Veterans Day, a CBOT floor trader said. The U.S. Department of Agriculture's weekly reports on crop progress and export inspections, typically released each Monday, will be delayed until Tuesday due to the holiday.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing and closing December wheat above psychological resistance at US$8.00, he said. The bears' next downside objective is closing prices below solid technical support at Friday's low of US$7.70.

 

First resistance is seen at Friday's high of US$7.89 and then at US$8.00. First support is seen at US$7.75 and then at US$7.70.

 

The wheat markets are expected to stumble despite news out during the weekend that India's state-run MMTC Ltd. has floated a wheat import tender for around 350,000 metric tonnes. Traders last week talked up the possibility of seeing an Indian tender for up to 1 million tonnes, so the smaller tender is largely factored in already, an analyst said.

 

India also is not expected to buy U.S. wheat due to disagreements over quality issues. The markets are waiting to see a renewed demand for U.S. wheat, and the export front was quiet during the weekend, a trader said.

 

China, meanwhile, plans to sell 200,000 metric tonnes of imported wheat from state reserves in an auction Thursday, the China National Grain and Oil Trade Center said. China holds auctions of imported wheat regularly each month to meet domestic demand.

 

In other news, Cooperative Bulk Handling Ltd. Monday reported receiving 1.1 million metric tonnes of grain into its storage system from a harvest underway in Western Australia state.

 

CBH estimates that total receivals from the drought-reduced harvest to be completed by year end will reach around 8 million tonnes, up about one third from a severely drought-affected harvest in 2006 but down from a longer-term annual average of 11 million tonnes. Usually, about 70% of the harvest is wheat, implying state production of around 5.6 million tonnes.

 

The Argentine wheat harvest continued at a brisk pace, with 8% of the 2007-08 crop harvested as of Friday, the Buenos Aires Cereals Exchange said in its weekly crop report. Yields from the first fields averaged 1.12 metric tonnes per hectare, the exchange said.