US Wheat Outlook on Monday: Nearby contracts seen down on corn, soy

 

 

Nearby U.S. wheat futures are expected to start lower on spillover pressure from neighboring markets, while new-crop contract months could find underlying support from lower-than-expected winter wheat acreage estimates, analysts said.

 

Chicago Board of Trade March wheat is called to open down 5 to 10 cents per bushel. In overnight electronic trading, CBOT March wheat fell 7 1/2 cents to US$6.22.

 

Expected losses in CBOT corn and soybeans should weigh on nearby wheat contracts, traders said. Corn and soybeans are called to open lower after the U.S. Department of Agriculture, in January crop reports issued Monday, increased U.S. production and stocks estimates.

 

The USDA pegged 2008-09 U.S. wheat carryout at 655 million bushels and wheat stocks as of Dec. 1 at 1.422 billion bushels, above the average trade estimates. However, estimates for 2009 winter wheat seedings were below expectations and seen as bullish for deferred contracts, traders said.

 

"The lower-than-expected winter wheat seedings numbers are fundamentally supportive to new-crop contracts, but old-crop futures will receive some pressure from higher domestic stocks," said Bill Nelson, analyst with Doane Advisory Services.

 

The USDA put all winter wheat seedings at 42.098 million acres, below the average analyst estimate of 44.178 million and the 46.181 million acres planted in 2008. Soft red winter wheat acres were pegged at 8.3 million acres, below the average analyst estimate of 9.381 million and the 11.2 million acres planted in 2008.

 

Large acreage decreases from last year occurred in all SRW growing states due to the late row crop harvest, high input costs, and a sharp fall in wheat prices, the USDA said. Planted area decreased 350,000 acres or more in Arkansas, Illinois, and Missouri, it said.

 

"Expect to see bear spreading on bearish U.S. carryover vs. bullish U.S. winter wheat acreage number," said Mike Zuzolo, senior analyst for Risk Management Commodities. "That should help support the July" CBOT wheat contract.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at last week's low of US$5.96 1/4, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at last week's high of US$6.46 1/4, he said.

 

First resistance is seen at Friday's high of US$6.32 and then at US$6.46 1/4. First support lies at Friday's low of US$6.12 1/2 and then at US$6.00.

 

Weather conditions should be cold in U.S. winter wheat areas this week, although snow cover should help protect the crop, meteorologists said. In Midwest soft red winter wheat areas, the coldest weather of the winter season to date is expected, along with periods of light-to-moderate snow, private weather firm DTN Meteorlogix said in a forecast.

 

"This snow will provide some protection to winter wheat," Meteorlogix said. The Plains hard red winter wheat belt is "expected to be on the western edge of the cold air affecting the Midwest with no damaging cold expected," the firm said.

 

In Ukraine and south Russia, temperatures moderated over the weekend in western areas, while some eastern areas remained below zero, according to Meteorlogix. It appears there was enough snow cover to prevent widespread winterkill from occurring, the firm said.

 

In other news, Tunisia said it bought 126,000 tonnes of optional origin wheat in a tender, on a cost and freight basis. It bought 84,000 tonnes of milling wheat and 42,000 tonnes of durum wheat, an official said.

 

The wheat harvest in Australia's New South Wales has ended, with grain production well up on last year's drought-ravaged crop, the state's Primary Industries Minister said. In China, wheat prices in major producing areas were stable in the week to Monday, supported by an ongoing drought, analysts said.