April 8, 2008

 

US Wheat Outlook on Tuesday: Seen slightly firmer in rebound

 

 

U.S. wheat futures are poised to start Tuesday's day session modestly higher in a rebound from a heavy sell-off, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 2 to 4 cents per bushel higher. In overnight electronic trading, CBOT May wheat ended up 2 3/4 cents at US$9.24.

 

The markets are due for a bounce as losses were a bit overdone Monday, said Vic Lespinasse, analyst for grainanalyst.com. Wheat futures tumbled Monday on profit-taking and a lack of support from the nearby Minneapolis Grain Exchange contract, which failed to lock limit up as it did in recent sessions.

 

Scattered demand news also was seen to be slightly supportive for wheat Tuesday, a CBOT floor trader said. Jordan said it was tendering to buy 100,000 metric tonnes of hard wheat on a cost and freight basis. The deadline for bids is April 17.

 

The Turkish government, meanwhile, said it had mandated the state-owned grain board to import 700,000 metric tonnes of wheat by the end of May 2009 without any customs taxes, according to a report. Turkey's wheat production may fall 30% in 2008 if a drought continues, an official said.

 

The potential for rain in hard red winter wheat areas of the U.S. Plains is seen as a little bearish, a trader said. There is a chance for moisture to fall in the driest areas of the western Plains, although it is still unknown how much the precipitation would help the crop, DTN Meteorlogix said in a forecast.

 

"This appears to be the best chance for widespread rain to occur through the wheat belt since the above average December rains," Meteorlogix said. "It may still not do much in the west, but it at least has a chance. After the short-range period, the long range now looks drier again, so if they miss this chance it may be awhile before there is another one."

 

The U.S. Department of Agriculture said Monday that 45% of the country's winter wheat was in good-to-excellent condition as of Sunday, down from 64% a year earlier. The rating was unsurprising given dry conditions in the Plain this year and last fall, traders said.

 

Traders are waiting for the USDA to release updated supply and demand numbers in a report due out at 8:30 a.m. EDT Wednesday. The average of analysts' estimates for 2007-08 wheat carryout is 261 million bushels, up from 242 million in March, according to a Dow Jones Newswires survey of 13 analysts.

 

The bulls' next upside price objective is to push and close CBOT July wheat above major 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 last week's low of US$9.05, he said.

 

First resistance is seen at US$9.50 and then at US$9.72. First support lies at Monday's low of US$9.35 and then at US$9.05.