April 21, 2008

 

US Wheat Outlook on Monday: Down on bearish momentum, follow-through

 

 

Bearish technical momentum and a lack of fresh bullish news should push down U.S. wheat futures at the start of Monday's day session, analysts said.

 

Chicago Board of Trade July wheat is called to open 8 to 12 cents per bushel lower. In overnight electronic trading, CBOT July wheat dropped 13 1/2 cents to US$8.71 1/2.

 

Follow-through selling should weigh on the wheat markets after a sell-off Friday, said Shawn McCambridge, analyst for Prudential Bache. Traders had been anticipating Monday's release of planting estimates from Statistics Canada, but they came in "pretty much as expected," McCambridge said.

 

Statistics Canada pegged all-wheat plantings at 25.109 million acres, within trade expectations of 22.8 to 27.5 million acres. Last year, growers in Canada planted wheat on 21.617 million acres.

 

Traders continue to watch weather forecasts, with increased focus on conditions for planting spring wheat in the U.S. northern Plains, traders said. Rainfall and cool weather should help recharge soil moisture in the region, DTN Meteorlogix said in a forecast.

 

The U.S. Department of Agriculture is due to issue its weekly crop progress report, including an update on spring wheat planting, at 4 p.m. EDT Monday. The report should also show a modest improvement in condition ratings for winter wheat due to warmer, drier conditions in soft red winter wheat regions, an analyst said. Showers Friday in the Delta were not as heavy as expected, and the region looks warmer for most of this week, Meteorlogix said.

 

There is some scattered demand news out, but nothing to get the markets too excited, traders said. Jordan said it was tendering to buy 100,000 tonnes of wheat, while Morocco's state wheat buyer said it was tendering to buy 24,450 metric tonnes.

 

"We're not expected to get that business," McCambridge said. "The demand side of the market continues to be a bit slow."

 

The bulls' next upside price objective is to push and close CBOT July wheat, which represents the new crop, above solid technical resistance at last week's high of US$9.60, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$8.50.

 

First resistance is seen at US$9.00 and then at Friday's high of US$9.16. First support lies at Friday's low of US$8.75 and then at US$8.50.