March 31, 2008

 

US Wheat Outlook on Monday: Seen lower on USDA data, technical weakness

 

 

U.S. wheat futures are expected to start Monday's day session lower on bearish crop data and technical weakness, traders said.

 

Chicago Board of Trade May wheat is called to open 15 to 20 cents per bushel lower. In overnight electronic trading, CBOT May wheat was 14 3/4 cents lower at US$9.74 1/4.

 

The U.S. Department of Agriculture estimated all wheat plantings at 63.803 million acres, slightly above the average analyst estimate of 63.625 million. In 2007, farmers planted 60.433 million acres.

 

Plantings of spring wheat, traded at the MGE, are pegged at 14.333 million acres this year, above the average analyst estimate of 14.147 million. Last year, spring wheat was planted on 13.297 million acres, according to the USDA.

 

Spring wheat is competing for acreage with corn and soybeans in the U.S. northern Plains. The USDA's soy acreage estimate was above expectations and its corn acreage estimate was below expectations.

 

Wheat is expected to be stuck between higher CBOT corn prices and weaker CBOT soybean prices, a floor trader said. Wheat is a follower of the other markets, he said.

 

"Wheat doesn't really have a story," a CBOT wheat trader said. "Corn and soy have a story now."

 

The USDA's new estimate for quarterly wheat stocks also was seen as bearish, traders said. The agency put stocks as of March 1 at 710 million bushels, above the average analyst estimate of 668 million.

 

There was "nothing positive" in the USDA crop reports for wheat, said Don Roose, president of U.S. Commodities. Technical selling could be another bearish factor for the markets after recent setbacks, traders said.

 

Technically, the wheat markets have been "breaking down" due to recent setbacks, a CBOT floor broker said. They have "a pretty good downtrend in place," added Rich Balvanz, analyst for Ag Management Services.

 

Bulls' next upside price objective is to push and close CBOT July wheat, which represents the new crop, above strong technical resistance at last week's high of US$11.15, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at the March low of US$9.60 1/2, he said.

 

First resistance is seen at US$10.00 and then at US$12.25. First support lies at Friday's low of US$9.72 and then at US$9.60 1/2.

 

Looking at the weather, the western Plains continue to trend drier, which increases stress to early spring growth of hard red winter wheat, DTN Meteorlogix said. Any significant precipitation continues to favor the eastern Plains for at least the next five days, the private weather firm said.

 

A wet weather pattern looks to continue over the eastern and southern Midwest, Meteorlogix said. The Delta region also looks to be wet this week, with additional flooding likely along the rivers and through low fields, the firm said.