April 1, 2008

 

US Wheat Outlook on Tuesday: Seen lower on follow-through, spillover

 

 

Follow-through weakness and technical selling should keep U.S. wheat futures on the defensive at the start of Tuesday's day session, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 15 to 20 cents per bushel lower. In overnight electronic trading, CBOT May wheat slid 18 1/2 cents to US$9.10 1/2.

 

CBOT wheat remains under pressure after closing limit down, or 60 cents lower, Monday on a higher-than-expected U.S. Department of Agriculture quarterly stocks estimate, traders said. Spillover selling from a sharp pullback in CBOT soybeans also should continue to weigh on wheat, they said.

 

It will be difficult for wheat to firm up amid the setback in soybeans and weakness in outside markets like crude oil and gold, traders said. Strength in the U.S. dollar is adding to the bearish tone for commodities, they said.

 

"We've got to stop the bleeding" in other markets before wheat can stabilize, a trader said.

 

Wheat is looking technically weak after recent setbacks of its own, a CBOT floor trader said. CBOT May wheat should find some psychological support at US$9 and then in the mid-US$8.70s, he said.

 

For CBOT July wheat, which represents the new crop, the bulls' next upside price objective is to push and close prices above psychological resistance at US$10.00, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$9.00, he said.

 

First resistance is seen at Monday's high of US$9.67 and then at US$10.00. First support lies at US$9.25 and then at US$9.00.

 

Wet weather remains a concern for soft red winter wheat, traded at the CBOT, although it is not garnering too much attention from the markets, a trader said. More precipitation is expected in the coming days across the eastern and southern Midwest and in the Delta region, DTN Meteorlogix said.

 

In the hard red winter wheat belt of the central and southern Plains, significant precipitation continues to trend toward eastern areas for the next five days, Meteorlogix said. The west may see light showers this week but probably not enough to reverse a late winter/early spring drying trend, the private weather firm said.