April 27, 2009

 

US Wheat Outlook on Monday: Seen lower on spillover, flu worries

 

 

Follow-through selling and spillover pressure from other markets is expected to press down U.S. wheat futures at the start of Monday's day session, with sellers swept up in worries about swine flu.

 

Chicago Board of Trade July wheat is called to open 12 to 15 cents per bushel lower. In overnight electronic trading, CBOT July wheat fell 13 1/2 cents to US$5.29 3/4.

 

There are worries that a global outbreak of swine flu will eat into feed demand after Russia during the weekend banned pork imports from nearly a dozen U.S. states. However, the outbreak should not have a long-term impact on feed use, analysts said. Swine flu viruses are not transmitted by food so consumers cannot contract swine flu from eating pork or pork products, according to the U.S. Department of Agriculture.

 

Worries about the impact of the flu on demand have sellers acting like "lemmings jumping off the ship," said Jerry Gidel, analyst for North America Risk Management Services. CBOT corn and soybeans tumbled overnight, along with wheat.

 

"The investing community right now is so skittish about everything and anything," Gidel said. "They kind of scared themselves into a big break."

 

Activity in the neighboring markets will help give wheat direction during the session, traders said. Weakness in outside markets, such as crude oil, adds pressure, a CBOT floor analyst said.

 

Traders are waiting to see the USDA's weekly crop progress report, due out at 4 p.m. EDT. The report will include updates on the condition of U.S. winter wheat and on planting of spring wheat.

 

Colder temperatures and wet conditions will likely keep field work and planting activities slow in the northern U.S. Plains, DTN Meteorlogix said in a forecast. Additional rain or snow early this week will further delay spring wheat seeding, the private weather firm said.

 

In hard red winter wheat areas of the central and southern Plains, widespread thunderstorm activity will in most cases favor jointing to reproductive wheat, Meteorlogix said. However, it is not certain if the Oklahoma and Texas wheat crops will improve much after adverse weather for most of the late winter and early spring. Also, some fields may be damaged by strong rain storms, some with hail and high winds and possibly tornados, 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 US$5.84 1/2, he said.

 

First resistance is seen US$5.45 and then at US$5.50. First support lies at US$5.36 1/4 and then at US$5.25, the technical analyst said.

 

In other news, Iraq issued a new tender to buy at least 50,000 metric tonnes of hard wheat, according to an official at the Grain Board of Iraq. Companies have to submit their offers to the board by 0700 GMT on May 3, and they will remain valid until May 7, the official said.