April 22, 2008

 

US Wheat Outlook on Tuesday: Seen slightly lower following overnight

 

 

Technical weakness and expectations for an increase in global production are expected to push U.S. wheat futures modestly lower at the start of Tuesday's day session, analysts said.

 

Chicago Board of Trade July wheat, which represents the new crop, is called to open 1 to 2 cents per bushel lower. In overnight electronic trading, CBOT July wheat slipped 2 1/2 cents to US$8.57.

 

Wheat has a lack of technical support after recent losses, traders said. CBOT July wheat needs to return above US$8.95 to US$8.96 in the next two trading days, or the market is likely to continue its technical sell-off, said Mike Zuzolo, analyst for Risk Management Commodities.

 

"If we don't regain the US$8.95 support level in the next two sessions, the downside is another 40-60 cents in July Chicago wheat," Zuzolo said in a note to clients.

 

The markets are focused on bearish idea that a big world wheat crop will ease tight stocks, traders said. India's wheat production in the year to June is expected to rise 1.3% to 76.78 million tonnes, the government said.

 

However, the wheat markets could bounce after the opening of trading amid spillover support from gains in CBOT corn and soybeans and in outside markets like crude oil, traders said.

 

There is some bullish fundamental news out, with Egypt's state-owned General Authority for Supply Commodities tendering for at least 55,000 to 60,000 metric tonnes of wheat. Still, there are ideas GASC will buy from the Black Sea region, traders said.

 

The U.S. Department of Agriculture on Monday said 45% of the U.S. winter wheat crop was in good-to-excellent condition, down two percentage points from the previous week. Traders had expected to see a slight improvement in the rating following favorable weather.

 

Recent rainfall in the U.S. central and southern Plains has favored spring growth of wheat, but more rain is still needed, DTN Meteorlogix said. The driest western areas should see only a few light showers this week, while central and east areas have more showers, the private weather firm said.

 

The bulls' next upside price objective is to push and close CBOT July wheat above major psychological resistance at US$9.00, 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$8.40, he said.

 

First resistance is seen at US$8.75 and then at US$9.00, the technical analyst said. First support lies at US$8.50 and then at Monday's low of US$8.40, he said.

 

In other news, Japan is seeking 86,000 tonnes of wheat, including 20,000 tonnes U.S. dark northern spring wheat and 20,000 tonnes semi hard wheat, in a routine tender to be concluded Thursday. The shipment is expected to arrive June 11 to July 10.