April 15, 2008

 

US Wheat Outlook on Tuesday: Seen up on spillover, overnight, demand

 

 

Spillover support and world demand should boost U.S. wheat futures at the start of Tuesday's day session, traders said.

 

Benchmark Chicago Board of Trade May wheat is called to open 12 to 15 cents per bushel higher. In overnight electronic trading, CBOT May wheat surged 15 3/4 cents to US$9.11 3/4.

 

Wheat will likely get swept up in gains in the neighboring CBOT corn and soybeans markets, said Vic Lespinasse, analyst for grainanalyst.com. Wheat may not be the leader of the grains, but it shouldn't trade in an opposite direction to the row crops, he said.

 

A rally in crude oil and weakness in the U.S. dollar also is bullish for commodities, traders said. Crude oil futures climbed to fresh record highs Tuesday morning, supported by technical buying, supply concerns and the weak dollar.

 

It is friendly to bulls that India's West Bengal state has issued a global tender to import 186,000 metric tonnes of wheat, a CBOT floor trader said. The business, meant to shore up local supplies in India, will take wheat off the world market, he said.

 

It also is mildly supportive that Kazakhstan imposed a ban on the export of wheat until Sept. 1, a trader said. There had already been chatter about the possibility of a ban, but confirmation of the move is friendly to bulls, he said.

 

Kazakhstan has been exporting wheat at a record rate of 1.1 million to 1.4 million metric tonnes a month, having exported to date 8 million tonnes of wheat out of the 2007 harvest. The ban is apparently an attempt to ensure adequate domestic supplies.

 

Japan, meanwhile, said it was seeking 88,000 tonnes of wheat, including 21,000 tonnes of U.S. dark northern spring wheat and 21,000 tonnes of U.S. semi hard wheat, in a routine tender to be concluded Thursday. The shipment is expected to arrive June 11 to July 10.

 

In other news, the U.S. Department of Agriculture said in its weekly crop progress report that the condition of winter wheat had improved 2 percentage points from last week to 47% good-to-excellent. The increase was expected by the trade, Lespinasse said.

 

Winter wheat in the central and southern Plains could see more beneficial rainfall in the next several days, DTN Meteorlogix said. Rain is most needed in the southwestern Plains, especially in Texas, but the precipitation will likely favor central and eastern areas of the region, the private weather firm said.

 

In the Delta, a frost and freeze is expected to be widespread, Meteorlogix said. Any heading or flowering wheat could be at risk in areas where the lows fall below freezing. Rain may return to the region late in the week, Meteorlogix said.

 

Plantings of U.S. spring wheat in the northern Plains are 8% complete, up from 6% last year but below the five-year average of 12%, the USDA said. Traders had expected planting to be 10% to 15% complete.

 

The bulls' next upside price objective is to push and close CBOT July wheat, which represents the new crop, above solid technical resistance at US$9.50, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at Monday's low of US$9.00, he said.

 

First resistance is seen at Monday's high of US$9.23 and then at US$9.35. First support lies at US$9.00 and then at US$8.80.