April 23, 2009

 

US Wheat Outlook on Thursday: Seen up on spillover, crop woes, bounce

 

 

U.S. wheat futures are expected to start a few cents higher Thursday on technical buying, crop concerns and spillover support from other markets.

 

Chicago Board of Trade July wheat is called to open 1 to 3 cents per bushel higher. In overnight electronic trading, CBOT July slipped 3/4 cent to US$5.27 1/4.

 

Wheat should pop at the opening following "positive" price action Wednesday and "pretty quiet" trading overnight, said Larry Glenn, broker and analyst for Frontier Ag. The markets are due for a bit of a technical recovery, he said.

 

"I expect a little more bounce," Glenn said. "We had a good day yesterday and we held it at the end of the session."

 

Bearish fundamental factors have been dialed into the markets, including worries about sluggish export demand, beneficial moisture for hard red winter wheat in the U.S. Plains and uncertainty about potential freeze damage to the crop, Glenn said. Kansas City Board of Trade July wheat was down 1/2 cent overnight at US$5.78. The KCBT trades HRW wheat.

 

Minneapolis Grain Exchange hard red spring wheat futures should continue to show strength after leading the upside in wheat Wednesday, traders and analysts said. There are ongoing concerns about planting delays due to cool, wet weather and about tight deliverable stocks of HRS wheat, traders said.

 

Colder and wetter weather is expected to return to the northern U.S. Plains during the next couple of days, according to private weather firm DTN Meteorlogix. That will likely keep spring fieldwork and planting activities slow, the private weather firm said.

 

Strength at the MGE would lend spillover support to KCBT and CBOT wheat, traders said. Expected gains in CBOT soybeans should also give wheat a boost, they said. MGE July wheat overnight was up 1/2 cent at US$6.40. CBOT July soybeans were up 11 1/2 cents at US$10.50 1/2.

 

In other news, total weekly U.S. wheat export sales of 431,500 tonnes were "solid," a CBOT floor trader said. Analysts had estimated sales would be 250,000 tonnes to 450,000 tonnes.

 

Net sales of 232,200 tonnes for delivery in 2008-09 were up 91% from the previous week and 8% from the prior four-week average, according to the U.S. Department of Agriculture. Top buyers were Nigeria, which booked 90,000 tonnes, and Japan, which took 43,800 tonnes, it said.

 

Japan, meanwhile, said it bought 148,000 tonnes of wheat, including 86,000 tonnes from the U.S., in a tender concluded Thursday. The shipment is expected to arrive June 1 to 13.

 

There is some concern about developing dryness in Ukraine and areas of eastern Europe, a trader said. Low-cost wheat exports from the Black Sea region have made U.S. wheat less competitive on the global market.