April 22, 2009

 

US Wheat Outlook on Wednesday: Seen 3-5 cents up on other marktes, crop worries

 

 

Firm neighboring markets are expected to pull U.S. wheat futures higher at the start of Wednesday's day session, with underlying support seen from concerns about U.S. crop conditions.

 

Chicago Board of Trade July wheat is called to open 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT July wheat jumped 5 1/2 cents to US$5.26 1/4.

 

CBOT soybeans and corn rose overnight and should lend strength to wheat at the opening of trading, a floor trader said. Soybeans are seen as the leader of the markets and have rallied lately on strong Chinese demand and worries about South American production.

 

"It's kind of follow-the-leader here," a CBOT wheat trader said.

 

There are ongoing concerns about possible freeze damage to hard red winter wheat in the U.S. central and southern Plains. Oklahoma and Texas seem to have been hit the hardest, but the extent of the damage won't be known for awhile, a CBOT floor analyst said.

 

Dry and much warmer weather will increase stress to wheat in Oklahoma and west Texas during the next few days, DTN Meteorlogix said in a forecast. Wheat elsewhere in the HRW wheat region will benefit from warmer temperatures after recent rains, the private weather firm said. Cooler temperatures and precipitation redevelops during the weekend, it said.

 

Wet fields in the northern U.S. Plains are still a concern for spring wheat planting, traders said. Planting is already behind schedule due to soggy conditions, and wet, cool weather may redevelop during the next few days, according to Meteorlogix.

 

Strength in European wheat prices helps support U.S. wheat, a CBOT trader said. A move above Tuesday's high in CBOT wheat could open the door for more of a move to the upside, he said.

 

However, bearishness about large world wheat supplies and sluggish export demand for U.S. wheat continues to hang over the markets, an analyst said. Export demand "will remain slow as the seemingly inexhaustible supply of cheap wheat is still flowing out of the Black Sea and into the major import markets," Country Hedging said in a market comment.

 

"The wheat market will need to rely on the row crops if it has any hope of a sustained rally," the firm said.

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below solid technical support at US$5.10 3/4, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at last week's high of US$5.45, he said.

 

First resistance is seen at US$5.27 3/4 and then at US$5.36 3/4, the technical analyst said. First support lies at US$5.16 1/4 and then at low of US$5.12 1/2, he said.