May 4, 2009

US Wheat Outlook on Monday: Weak start following strong gains Friday

U.S. wheat futures are called to open modestly lower Monday morning, on a corrective pullback from strong gains on Friday.

Chicago Board of Trade wheat futures are called to open down 3 to 6 cents. In overnight electronic trading, July Chicago wheat last traded down 4 cents at US$5.66 a bushel.

Price action Friday saw July Chicago wheat gain over 30 cents a bushel and hit a fresh three-week high. Wheat futures were pulled higher by solid gains in corn and soybeans Friday. If the soybean market sustains strong gains Monday, wheat futures could be pulled higher, just like late last week, said Victor Lespinasse, veteran grain market analyst with www.grainanalyst.com.

The weather conditions in the wheat-growing regions of the U.S. have improved the past several days - drier in the previously wet northern plains states and some beneficial rains in the southern Plains recently, said Lespinasse.

In the spring wheat regions of the northern U.S. plains states, mostly drier and warmer weather is forecast for this week. Wet soils from previous flooding will delay spring wheat planting, with some acreage possibly not getting planted. Planting of spring wheat is well behind normal, according to Meteorlogix weather. Meantime recent and forecast rain across the souther U.S. plains states will favor the developing crop and help it recover from freeze damage across Texas, Oklahoma and southern Kansas, said Meteorlogix.

The annual Wheat Quality Council hard red winter tour kicks off Tuesday. Traders will be watching for dispatches coming from reporters covering the tour.

The latest commitments of traders report issued by the Commodity Futures Trading Commission on Friday shows commercial interests in Chicago wheat shedding net long positions by 7,051 contracts, to 173,429 contracts. Meantime, large speculators added 2,971 contracts, to their net long positions, which now total 68,391 contracts.

Technically, July Chicago wheat on Friday closed solidly higher, near the session high, hit a fresh three-week high and closed at a bullish weekly high close. Bulls have gained upside near-term technical momentum. The bulls' next upside price objective is to push and close July futures prices above solid technical resistance at the April high of US$5.84 1/2 a bushel. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$5.40.