April 25, 2008

 

US Wheat Outlook on Friday: Seen down on lack of fundamental support

 

 

Strength in the U.S. dollar and an absence of fundamental support should weigh on U.S. wheat futures at the start of Friday's day session, traders said.

 

Chicago Board of Trade July wheat is called to open 6 to 8 cents per bushel lower. In overnight electronic trading, CBOT July wheat fell 7 3/4 cents to US$8.16 1/4.

 

The neighboring CBOT corn and soybean markets also stumbled overnight on the firm greenback and follow-through selling from Thursday, an analyst said. Carryover pressure should continue to keep the grains on the defensive, he said.

 

The wheat markets lack fundamental support ahead of the upcoming harvest in the Northern Hemisphere, an analyst said. There are no major weather problems for the crop, he said, and the U.S. Department of Agriculture may bump up its U.S. condition rating Monday in the weekly crop progress report.

 

Recent precipitation has been favorable for wheat in the U.S. Plains, although temperatures in the region are expected to drop 7-15 degrees Fahrenheit below normal this weekend, DTN Meteorlogix said in an outlook. There is a chance for frost as far south as the Texas and Oklahoma panhandles, the private weather firm said.

 

"I do not expect this episode to cause significant damage to heading wheat in the south but it does bear watching," Meteorlogix forecaster Joel Burgio said in the outlook.

 

In spring wheat areas of the northern Plains, "recent rainfall has helped recharge soil moisture, especially east and south areas," Meteorlogix said. Still, cold, damp weather may slow field work, according to the weather firm.

 

Bears have solid downside technical momentum on their side in the wheat markets, a market technician said. Prices are still in a six-week-old downtrend on the daily bar chart, he said.

 

The bulls' next upside price objective is to push and close CBOT July wheat, which represents the new crop, above solid technical resistance at this week's high of US$8.75, the technician said. The next downside price objective for the bears is pushing and closing prices below major psychological support at US$8.00.

 

First resistance is seen at Thursday's high of US$8.37 and then at US$8.50. First support lies at Thursday's low of US$8.16 and then at US$8.00.

 

India's wheat production this crop year will likely be 73 million tonnes, down from 75.81 million tonnes last year, Rabobank International said in a report. The forecast is well below the Indian government's projection of 76.78 million tonnes.

 

India will need a substantial import program if the government wants to achieve its goals for building stocks, Rabobank said. The government plans to build a strategic food grain reserve of 5 million tonnes to ensure the country's food security.