April 7, 2009

 

US Wheat Outlook on Tuesday: Down on spillover pressure; weather threatens

 

 

Spillover pressure from outside markets should weigh on U.S. wheat futures at the start of Tuesday's day session, although traders are keeping an eye on threatening weather and crop conditions.

 

Chicago Board of Trade May wheat is called to open 4 to 6 cents per bushel lower. In overnight electronic trading, CBOT May wheat slid 6 3/4 cents to US$5.50 1/4.

 

Slipping crude oil, expected losses in equities and a firmer U.S. dollar are seen as bearish influences on the grains, a CBOT floor analyst said. A strong dollar is considered bearish because it makes U.S. grain less attractive to foreign buyers.

 

A weak close Monday and follow-through selling overnight "may leave wheat on the defensive for the rest of the week," Fortis said in a market comment. "Strength in the dollar is particularly negative for wheat, and the market may be looking past the slight drop in wheat conditions seen on yesterday's weekly [U.S. Department of Agriculture crop progress] report versus last year's conditions."

 

Overall, 43% of the country's winter wheat was rated good to excellent as of Sunday, compared to 45% a year earlier and 65% last fall, the USDA said Monday in its first national crop progress report of the year. The drop in the national ratings from last fall was led by HRW wheat, with crops in the southern and central Plains putting pressure on the national average, an analyst said.

 

Weather continues to be a key factor in the market, with some support possible from concerns that cold weather in the U.S. Plains could nip yields, a trader said. Any heading hard red winter wheat in southwest Oklahoma and north-central Texas is at risk if temperatures fall below freezing for a few hours, private weather firm DTN Meteorlogix said in a forecast.

 

In Texas, 23% of winter wheat was headed as of Sunday, up from 4% last year and the five-year average of 9%, according to the National Agricultural Statistics Service. HRW wheat is used to make bread.

 

"Cold weather is prompting concerns about the overall health of the U.S. wheat crop," Country Hedging said in a note.

 

Bulls' next upside price objective is to push and close CBOT May wheat above solid technical resistance at US$5.89 3/4, a technical analyst said. The next downside price objective for the bears is pushing and closing the contract below solid technical support at US$5.20, he said.

 

In other news, grain traders are starting to look ahead to a USDA supply-and-demand report and to the coming three-day Easter weekend, the analyst said. The report, which will include an updated estimate of U.S. wheat carryover, is due out at 8:30 a.m. EDT Thursday.