April 14, 2009

 

US Wheat Outlook on Tuesday: Seen slightly up on soy, follow-through

 

 

U.S. wheat futures are expected to open a shade higher Tuesday following a small jump overnight, with support seen from firm Chicago Board of Trade soybeans.

 

CBOT May wheat is called to open up 1 to 3 cents per bushel. In overnight electronic trading, CBOT May wheat rose 3/4 cent to US$5.24.

 

May soybeans were up 8 cents overnight at US$10.29 1/2 and could lend spillover strength to the grains during the day session, a CBOT floor analyst said. Gains in soybeans helped underpin wheat Monday, he said.

 

"If beans are up a dime, wheat will not ignore that," he said.

 

However, wheat could trade both sides during the day session amid ideas that rallies are selling opportunities, an analyst said. Ample global wheat supplies are a bearish fundamental factor for the market, he said.

 

The wheat markets could find some support from a slight drop in the U.S. Department of Agriculture's winter wheat condition rating, a trader said. The crop was rated 42% good to excellent as of Sunday, down one percentage point from the previous week.

 

The decline is "not bearish," although it wasn't unexpected, an analyst said. Hard red winter wheat in the southern Plains has struggled with dryness and was hit with a threatening cold snap last week.

 

Significant rainfall is expected in the region Thursday and Friday, which should improve soil moisture levels for crop development and possibly mitigate the effects of some of the freeze damage, DTN Meteorlogix said in a forecast. HRW wheat is used to make bread.

 

The USDA said U.S. spring wheat planting was 2% complete as of Sunday, down from the average of 11%. Excessive wetness in the northern Plains has slowed seeding.

 

Planting delays are expected to persist in the Red River Valley, although recent dry weather has generally allowed for the severe flood conditions to improve, Meteorlogix said. Drier weather should return during the six-to-10-day period after some light to moderate rain Thursday and Friday, according to the private weather firm.

 

In other news, Iraq issued a new tender to buy at least 50,000 tonnes of hard wheat, the Grain Board of Iraq said. Offers must be submitted by the end of office hours April 19 and remain valid until April 23. Iraq usually buys more wheat than the amount it requests in tenders.

 

The next downside price objective for the bears is pushing and closing CBOT May wheat below solid technical support at US$4.98 1/2, a technical analyst said. The 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$5.30 1/2 and then at US$5.40. First support lies at US$5.15 1/4 and then at US$5.07, he said.