March 31, 2010
US Wheat Outlook on Wednesday: Seen down with CBOT corn, soybeans
U.S. wheat futures are expected to start lower Wednesday on spillover selling from neighboring markets after government crop reports failed to offer wheat traders anything bullish.
Chicago Board of Trade is called to open 5 to 7 cents per bushel lower. In overnight electronic trading, CBOT May wheat slipped 1 1/4 cents, or 0.3%, to US$4.70 3/4 a bushel.
The U.S. Department of Agriculture, in its quarterly grain stocks report, confirmed that wheat supplies are large, said Don Roose, president of U.S. Commodities. The government pegged stocks as of March 1 at 1.352 billion bushels, a bit below the average analyst estimate of 1.364 billion but up sharply from 1.04 billion a year earlier.
It's well-known that there's a lot of wheat to go around in the world and that there is stiff competition for export business. U.S. wheat is seen as too expensive to be competitive for sales to price-conscious buyers.
Large quarterly stocks estimates for corn and soybeans were seen as bearish, and selling could spill over into wheat, which has been a follower. Some traders are calling soybeans to suffer double-digit losses, which is "going to hit the corn and wheat," said Mike Zuzolo, president of Global Commodity Analytics.
The USDA issued prospective plantings estimates and pegged 2010-11 U.S. spring wheat seedings at 13.906 million acres, above the average trade estimate of 13.558 million. In the 2009-10 crop year, producers seeded 13.3 million acres.
The spring wheat number is "negative" for prices because it exceeded expectations, while wheat's quarterly stocks estimate is "neutral," Country Hedging said in a note. Outside markets, including gains in crude oil are weakness in the U.S. dollar, look supportive, according to the brokerage firm.
Larger-than-expected spring wheat plantings should cause Minneapolis Grain Exchange wheat to trim its premium over CBOT wheat, a trader said. MGE trades hard red spring wheat, while the CBOT trades soft red winter wheat.
The next downside price objective for bears is pushing and closing CBOT May wheat below solid technical support at US$4.50, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.00, he said.
First resistance is seen at US$4.75 and then at US$4.80. First support lies at Tuesday's contract low of US$4.62 1/4 and then at US$4.50, the analyst said.