March 31, 2009

 

US Wheat Outlook on Tuesday: Seen up on spillover support, soy

 

 

U.S. wheat futures are poised to start stronger Tuesday on spillover strength from neighboring markets following the release of government crop data.

 

Chicago Board of Trade May wheat is called to open 3 to 6 cents per bushel higher. In overnight electronic trading, CBOT May wheat rose 1 1/4 cents to US$5.13 3/4.

 

Wheat should feel support from CBOT soybeans after the U.S. Department of Agriculture estimated 2009 soybean plantings would be below trade expectations, traders said. The USDA pegged soy acres at 76.024 million acres, below the average trade estimate of 79.251 million.

 

Short-covering could help boost wheat, traders said. Non-commercial speculative funds are net short in CBOT wheat, they said.

 

"I would say you're looking at sharply higher soybeans and corn following and wheat following," said Brian Hoops, president of Midwest Market Solutions.

 

The USDA's prospective plantings and quarterly grain stocks reports were mostly "neutral" for wheat, traders said. Wheat acres, as expected, are seen down significantly from last year following a steep drop in prices.

 

The USDA pegged all-wheat plantings at 58.638 million acres, compared to the average trade estimate of 58.856 million and to the 63.147 million planted in 2008. Other spring wheat acres were estimated at 13.304 million, compared to the average trade estimate of 13.639 million and the 14.135 million planted in 2008.

 

The USDA estimated wheat stocks as of March 1 at 1.037 billion bushels, compared to the average analyst estimate of 1.062 billion. Stocks were 1.422 billion as of Dec. 1 and 709 million as of March 1, 2008.

 

"Wheat was neutral, with the lower-than-expected spring wheat acres already priced into the market," said Mike Zuzolo, analyst for Risk Management Commodities Inc.

 

Wet weather and flooding in the U.S. northern Plains should delay fieldwork and possibly planting of spring wheat, traders said. In the central and southern Plains, additional "significant precipitation" appears likely during the 10-day period after a blizzard during the weekend, DTN Meteorlogix said in a forecast. However, it's not certain whether the precipitation will hit typically drier southwest growing areas, the private weather firm said.

 

In other news, Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, or GASC, is seeking 25,000 to 60,000 of wheat for April 21-30 shipment, according to reports. The tender is "somewhat of a surprise" because "Egypt's domestic harvest will begin in late April and will be in full swing in early May," AgResource Co. said in a market comment.

 

Japan, meanwhile, said it won't hold its weekly wheat tender this week but didn't provide any reasons for the decision.

 

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$5.16 and then at US$5.20. First support lies at today's low of US$5.01 and then at US$4.98 1/2.