April 3, 2007

 

US Wheat Outlook on Tuesday: 2-3 cents higher following overnight gains

 

 

Modest gains overnight are expected to push U.S. wheat futures to start higher in Tuesday's day session, traders and analysts said.

 

Benchmark Chicago Board of Trade May wheat is called to open 2 to 3 cents higher per bushel.

 

In e-cbot trading, CBOT May wheat rose 2 3/4 cents to US$4.30 3/4, while CBOT July wheat rose 2 1/2 cents to US$4.44 1/2.

 

Follow-through buying from the overnight session, along with support from similar advances in the neighboring corn market, should put wheat in positive territory in early activity, floor traders said. There also are ideas that wheat is in an oversold condition and due for a bounce after heavy losses last Friday, they added.

 

The generally good early spring growing conditions for the hard red winter wheat crop in the U.S. Plains, however, are seen as being fundamentally bearish for prices, analysts noted.

 

The U.S. Department of Agriculture's first winter wheat conditions report showed wheat crop conditions were well above last year's levels but in line with expectations, an analyst said.

 

The USDA reported 71% of the U.S. winter wheat crop was in good-to-excellent condition as of April 1, compared to 38% last year. In Kansas, the nation's largest hard red winter wheat- producing state, 77% of the crop was rated in good-to-excellent condition, while in Oklahoma, 74% of the crop was rated in good-to-excellent condition, the USDA said.

 

Colder weather late in the week or during the weekend may bring a frost or light freeze to the U.S. Southern Plains wheat areas as far south as Oklahoma, according to Meteorlogix. The coolness will slow development of wheat, the weather firm said.

 

There are some general concerns about the crop in the soft red wheat growing areas of the eastern U.S. Midwest, an analyst said. In Ohio, a major soft red wheat growing state, 37% of the crop is rated in good-to-excellent condition, up only 5 percentage points from when the crop entered dormancy last fall, according to the USDA.

 

Colder weather also is on tap for the eastern Midwest with a freeze possible into southern Missouri and the lower Ohio River valley by the end of the week, Meteorlogix said. Wheat development should be set back, the firm reported.

 

Wheat is also technically weak, a technical analyst said. On Monday, CBOT May wheat prices closed nearer the session high after hitting a fresh 7 1/2-month low early on.

 

"Wheat has seen heavy selling pressure the past two sessions amid the big declines in corn futures," the technical analyst said. "Bears have the solid near-term technical advantage."

 

The next downside price objective for the bears is closing CBOT May wheat below solid support at the August 2006 low of US$4.04 1/2. The bulls' next upside price objective is to close prices above solid resistance at US$4.55, which would fill on the upside Friday's downside price gap on the daily bar chart, the analyst said.

 

First resistance is seen at Monday's high of US$4.38 and then at US$4.45. First support lies at US$4.25, then US$4.20 and then at Monday's low of US$4.12.

 

At the Kansas City Board of Trade, May wheat prices on Monday closed near mid-range but slumped to a fresh 12-month low amid a big drop in corn.

 

"Bears now have the solid near-term technical advantage in hard red winter," the technical analyst said.

 

The bears' next downside objective is closing KCBT May wheat below solid support at Monday's low of US$4.33. The bulls' next upside price objective is closing prices above solid chart resistance at US$4.66, which would fill on the upside Friday's downside price gap on the daily bar chart.

 

First resistance is seen at US$4.50 and then at Monday's high of US$4.54 1/2. First support is seen at US$4.40 and then at Monday's low of US$4.33.

 

In other news, Japan said it was seeking 170,000 metric tonnes of wheat in the first weekly tender for the financial year that began April 1. The tender is scheduled to be concluded on Thursday. The bulk of the wheat is scheduled to arrive in Japan sometime in June, although 75,000 tonnes are expected to arrive sometime in May.

 

Syria's General Establishment for Cereal Processing and Trade, or Hoboob, said Tuesday it canceled a tender to sell 100,000 metric tonnes of durum wheat.

 

In New South Wales, usually one of the two major Australian states for winter crops including wheat, fields need widespread rains to spur plantings, according to an occasional grains report issued Tuesday by the state's Department of Primary Industries.