April 29, 2008

 

US Wheat Outlook on Thursday: Seen up on spillover from CBOT corn

 

 

Spillover support and short-covering are expected to drag U.S. wheat futures higher at the start of Tuesday's day session, traders said.

 

Chicago Board of Trade July wheat is called to open 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT July wheat climbed 4 1/4 cents to US$8.45 1/4.

 

Wheat should follow the CBOT corn market higher, with some additional support from strength in soybeans, traders said. Position-evening also is expected after recent heavy sell-offs, they said.

 

There is not much fresh fundamental news out for wheat, traders said. The outlook for the markets remains bearish going into the Northern Hemisphere's winter wheat harvest, an analyst said. Global production is expected to increase as farmers expanded seedings due to high prices.

 

"The market is 'pausing' at present after recent losses, and this pause is not bullish," a technical analyst said. "Prices are still in a six-week-old downtrend on the daily bar chart."

 

The U.S. Department of Agriculture's weekly crop progress report, issued Monday afternoon, contained few surprises for wheat, an analyst said. The agency said 46% of the U.S. winter wheat crop was in good-to-excellent condition as of Sunday, up one percentage point from the previous week but down from 56% last year.

 

"Even though the present U.S. winter wheat crop conditions are less than average, globally the crop is doing well and headed towards larger production than year ago levels," according to a research note from Allendale.

 

Traders had generally expected to see U.S. ratings improve from last week following beneficial weather in the Plains. Still, development of the crop remains behind schedule, with 15% of the crop headed, compared to 24% last year and the average of 25%.

 

Meteorologists are watching out for unusual cold weather systems in the central and southern Plains, DTN Meteorlogix said. Colder temperatures are expected in the northern Delta, although conditions should not be cold enough in the south to impact heading or flowering wheat, the private weather firm said.

 

In the northern U.S. Plains, spring wheat planting was 34% complete, compared to 28% last year and the average of 40%. Snow and rain may help recharge soil moisture in central and eastern areas of the region this week, although cold temperatures could slow seeding and the development of the crop, Meteorlogix said.

 

Bulls' next upside price objective is to push and close CBOT July wheat, which represents the new crop, above solid technical resistance at last week's high of US$8.75, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at last week's low of US$8.14.

 

First resistance is seen at Monday's high of US$8.43 and then at US$8.50. First support lies at US$8.25 and then at US$8.14.