April 28, 2009

 

US Wheat Outlook on Tuesday: Seen slightly up on rebound from slide

 

 

U.S. wheat futures are expected to start slightly higher Tuesday in a rebound from heavy losses, although technical weakness and lingering swine flu fears could weigh on prices, traders said.

 

Chicago Board of Trade July wheat is called to open 2 to 4 cents per bushel higher. In overnight electronic trading, CBOT July wheat rose 5 1/2 cents to US$5.25.

 

Wheat was hit hard Monday by worries that an outbreak out of swine flu will curb pork consumption and demand for animal feed. The sell-off was "overdone," with CBOT July wheat closing down 23 3/4 cents, a CBOT trader said.

 

Still, uncertainty about the impact of the flu may keep a "cautionary" attitude in the markets, the trader said. "Irrationality reigned supreme yesterday, [but] it may be some days yet before rationality returns," said Dennis Gartman, publisher of the Gartman Letter.

 

Monday's slide did technical damage to wheat, as CBOT July wheat ended below major moving averages, a trader said. The contract would regain some strength with a move above US$5.39 to US$5.40, he said.

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below major psychological support at US$5.00, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.50 1/2, he said.

 

First resistance is seen at US$5.25 and then at US$5.35, the analyst said. First support lies at US$5.18 1/4 and then at US$5.10 3/4, he said.

 

"Wheat bears have the overall near-term technical advantage and gained some fresh momentum Monday," he said.

 

Concerns about spring wheat planting delays in the northern U.S. Plains remain supportive, particularly to Minneapolis Grain Exchange wheat, traders said. The crop was 15% planted as of Sunday, below the 32% planted at this time last year and the average of 36%, according to the U.S. Department of Agriculture.

 

"Colder temperatures and wet conditions likely keep field work and planting activities slow," DTN Meteorlogix said in a forecast. "Additional rain during the next few days will further delay spring field work."

 

The USDA raised its good-to-excellent condition rating for U.S. winter wheat by two percentage points to 45%. The improvement was expected after rains last week in the southern Plains.

 

In other news, Japan is seeking 156,000 tonnes of wheat in a routine tender to be concluded Thursday. The shipment is expected to arrive June 15 to July 14.