April 23, 2008

 

US Wheat Outlook on Wednesday: Down on technical pressure, big crop ideas

 

 

Technical weakness and expectations for an increase in world supplies are expected to weigh on U.S. wheat futures at the start of Wednesday's day session, traders said.

 

Chicago Board of Trade July wheat is called to open 6 to 8 cents lower per bushel. In overnight electronic trading, CBOT July wheat slipped 9 3/4 cents to US$8.56 1/4.

 

Wheat continues to come under technical pressure as the markets are in a "solid downtrend," a CBOT trader said. The northern hemisphere's approaching harvest and expectations for an increase in world production are fundamentally bearish, he said.

 

It seems farmers around the world responded to high prices in wheat by expanding wheat plantings, said Vic Lespinasse, analyst for grainanalyst.com. Recent talk of strong production potential in the E.U. and China is bearish, he said.

 

"The market's telling us it's going to be a big crop," Lespinasse said.

 

However, wheat could see a correction to the upside after recent setbacks, an analyst said. Wheat news is turning more bullish, with weather models pointing to "disappointing rains" for dry, western parts of Kansas, Texas, Oklahoma and eastern Colorado, he said.

 

Recent rainfall has favored spring growth of wheat in the central and southern Plains, DTN Meteorlogix said. More rain is still needed, especially through the west Texas region and in the far west areas, the private weather firm said.

 

"Rainfall through the balance of this week will favor northern and eastern areas," Meteorlogix said in a forecast.

 

Traders will be keeping an eye of the wheat-corn spread during the session, the analyst said. The spread overnight ended at US$2.52, premium wheat, which is "in the top end of normal historical parameters," he said.

 

Bulls' next upside price objective is to push and close CBOT July wheat, which represents the new crop, above major psychological resistance at US$9.00, the market technician said. The next downside price objective for the bears is pushing and closing prices below solid support at this week's low of US$8.40, he said.

 

First resistance is seen at Tuesday's high of US$8.75 - the top of a downside price gap on the daily chart - and then at US$9.00. First support lies at US$8.40 and then at US$8.25.

 

In other news, Pakistan said it was planning to import 1 million to 1.5 million metric tonnes of wheat by February 2009. The government said it also decided to buy 5 million tonnes of wheat on the local market to build up its stocks, t.

 

India's local wheat purchases for the crop marketing year that started in April might exceed the government's target of 15 million tonnes due to bumper production and a high price to farmers, the farm minister said. Such a large purchase by state-run agencies would negate the need for further imports by the country and could leave an adequate reserve for next year, he said.