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DJ US Wheat Outlook:Down On Profit-Taking, Awaiting Egypt Results82 days ago
CHICAGO (Dow Jones)--Profit-taking is expected to pull down U.S. wheat futures early Thursday as traders await the results of an Egyptian tender.
Chicago Board of Trade December wheat is expected to start 10 to 15 cents per bushel lower. In overnight electronic trading, CBOT December wheat dropped 12 1/4 cents to $5.54 and CBOT March wheat slid 12 1/4 cents to $5.75 3/4.
Wheat is technically overbought and lacks fundamentals to support a recent 80-cent rally, a trader said. The markets look ready to extend losses after posting a "bearish technical reversal" Wednesday, in which prices hit fresh highs for the recent move before closing lower, he said.
CBOT July wheat, which represents the new U.S. soft red winter wheat crop, faces a "significant test" to see whether it can hold above its 200-day moving average around $5.96, said Mike Zuzolo, president of Global Commodity Analytics and Consulting. A move below that price on a weekly close would signal a top in wheat, he said in a research note. CBOT July wheat overnight fell 12 1/2 cents to $5.97.
The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at $5.40, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at Wednesday's high of $6.04 3/4, he said.
First resistance is seen at $5.93 and then at $6.00, the technical analyst said. First support lies at $5.77 and then at this week's low of $5.62, he said.
Traders said they do not expect the U.S. to be competitive in a tender from Egypt's state-owned General Authority for Supply Commodities because prices are too high. Egypt, a major buyer on the world market, is known for being price conscious.
Weekly U.S. wheat export sales of 362,400 tons were down 12% from last week and 13% from the prior four-week average, according to the U.S. Department of Agriculture. The sales were at the low end of trade estimates, which ranged from 300,000 to 500,000 tons.
In other export news, Japan said it bought 113,000 tons of wheat, including 71,000 tons from the U.S., in a routine tender. The wheat is expected to arrive Dec. 21 to Jan. 20.
In China, recent heavy snowfall in major winter wheat areas helped ease drought, but may also affect crops' growth, according to the Ministry of Agriculture. The snow, which hit significantly earlier than usual, came with low temperatures that hindered the growth rate of the winter wheat, the ministry said in a statement on its Web site.
U.S. hard red winter wheat in the central and southern Plains has "mostly favorable conditions" for emergence and development, according to private weather firm DTN Meteorlogix. Rain in the Midwest has slowed the remaining soft red winter wheat planting, but the region should be drier during the next five days, the firm said in a forecast.
-By Tom Polansek, Dow Jones Newswires; 312-341-5780; tom.polansek@dowjones.com
(END) Dow Jones Newswires
November 19, 2009 09:14 ET (14:14 GMT)
By Tom Polansek
Of DOW JONES NEWSWIRES
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