March 30, 2009

US Wheat Outlook on Monday: Down on spillover; positioning expected

U.S. wheat futures are poised to start weaker Monday on pressure from other markets, with some positioning expected ahead of key crop reports.

Chicago Board of Trade May wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT May wheat slipped 2 1/4 cents to US$5.05.

Losses in equities and crude oil should be a bearish influence on the grains, analysts said. A firm U.S. dollar is seen as bearish because it makes U.S. grains less attractive to foreign buyers.

CBOT soybeans and corn stumbled overnight, along with wheat. Wheat should start out lower "following row crops and outside markets," Country Hedging said in a market note.

There was little fresh fundamental news out during the weekend, analysts said. Traders continue to watch weather in hard red winter wheat areas of the U.S. central and southern Plains and in hard red spring wheat areas of the northern Plains.

A blizzard Friday over parts of Colorado, Kansas, Oklahoma and Texas will mean beneficial moisture for wheat as the snow melts during the coming days, private weather firm DTN Meteorlogix said. Cool-to-cold temperatures will slow development of wheat, but damaging cold is not expected, it said.

Flooding in the Red River Valley over the eastern Dakotas and northwest Minnesota should lead to "major delays" in spring fieldwork, Meteorlogix said. Delays in planting could prompt farmers to switch acres to soybeans from spring wheat, analysts have said.

The U.S. Department of Agriculture is due to issue its prospective plantings and quarterly grain stocks reports at 8:30 a.m. EDT Tuesday. The plantings report will include estimates on spring wheat acres, although seeding intentions could change due to weather, traders said.

Kansas City Board of Trade and Minneapolis Grain Exchange wheat futures were up slightly overnight, even though CBOT wheat stumbled. KCBT May wheat rose 1/4 cent to US$5.50 1/4, while MGE May wheat gained 1 3/4 cents to US$6.09 1/2. HRS wheat is traded at MGE, and HRW wheat is traded at KCBT.

The next downside price objective for the bears is pushing and closing CBOT May wheat below solid technical support at US$4.98 1/2, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.50, he said.

First resistance is seen at US$5.17 1/2 and then at US$5.25. First support lies at Friday's low of US$5.03 and then at US$5.00.