April 13, 2009

 

US Wheat Outlook on Monday: Down on global supply, spillover pressure

 

 

Weakness in other markets and plentiful world supplies are expected to knock down U.S. wheat futures at the start of Monday's trading session.

 

Chicago Board of Trade May wheat is called to open 2 to 5 cents per bushel lower. In overnight electronic trading, CBOT May wheat slipped 4 cents to US$5.18.

 

Neighboring CBOT soybeans and corn were lower overnight with wheat. Outside markets like crude oil and equities are expected to be lower and to send bearish signals to the grains at the opening, traders said.

 

There was little fresh fundamental news out for wheat during the weekend, an analyst said. Ample global supplies continue to hang over the markets, he said.

 

"Wheat prices will be under pressure as the supply of world wheat seems to be growing every month," Country Hedging said in a market comment. "The coming U.S. winter wheat harvest should only serve to perpetuate that trend."

 

The U.S. Department of Agriculture on Thursday raised its estimate for 2008-09 world wheat carryout to 158.1 million tonnes from its March estimate of 155.85 million. Supplies are "abundant," Country Hedging said.

 

The USDA at 4 p.m. EDT is due to issue its weekly crop progress report, which will give the markets an update on the condition of U.S. winter wheat. Weekend rains over some of the driest areas of Texas and Oklahoma may have given the hard red winter wheat crop a boost, private weather firm DTN Meteorlogix said.

 

Wheat in the central and southern Plains has struggled with dryness throughout the winter. Plants lost due to a recent cold snap may not recover in some cases, even with rain, Meteorlogix said.

 

In spring wheat areas of the northern U.S. plains, showers and some rain may develop later in the week, according to the firm. Rainfall and cool temperatures will keep field work slow following flooding in some areas, Meteorlogix said.

 

The next downside price objective for bears is pushing and closing CBOT May wheat below solid technical support at US$4.98 1/2, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.72 3/4, he said.

 

First resistance is seen at US$5.43 1/2 and then at US$5.50. Support lies at US$5.15, he said.