May 5, 2009

US Wheat Outlook on Tuesday: Up, following beans, corn; highrs to lead

U.S. wheat futures are called to open moderately higher Tuesday morning, on a corrective bounce from solid losses on Monday, and amid higher soybean and corn prices in overnight electronic trading.

Chicago Board of Trade wheat futures are called to open up 6 to 10 cents. In overnight electronic trading, July Chicago wheat last traded up 7 3/4 cents at US$5.58 3/4 a bushel.

The weekly crop progress reports issued Monday afternoon showed spring wheat planting progress continues to lag well behind the normal pace. USDA reported plantings at 23% complete, which is up 15 percentage points from last week but still well below the 55% complete figure from a year ago and the five-year average of 59%.

"We took some premium out of spring wheat futures last week, thinking that planting progress would significantly improve, but there was not a whole lot of planting progress made last week," said Brian Hoops of Midwest Market Solutions. He said spring wheat futures should lead wheat prices on the upside Tuesday. However, Hoops added that recent beneficial rains in the hard red winter regions of the plains states could limit the upside in the wheat futures complex.

Recent and forecast rain events across the southern U.S. plains states will favor the developing crop and help it recover from freeze damage across Texas, Oklahoma and southern Kansas, said Meteorlogix weather. Meantime, in the northern plains states, it will be mostly dry this week, which will help dry out wet fields in that region.

The condition of the winter wheat crop improved marginally over the last week. USDA reported that as of Sunday, 47% of the winter wheat crop was rated good to excellent versus 45% last week. Fourteen percent of the crop is now rated very poor compared to 13% last week. USDA reported 27% of the winter wheat crop is headed, which is up 6% from a week-ago, but 8% behind normal. Only 3% of the Kansas wheat crop is headed, versus 25% on average.

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 tour concludes on Thursday afternoon, when tour participants will estimate the size of the Kansas wheat crop.

Technically, the next downside price objective for the bears is pushing and closing prices below solid technical support at the March low of US$5.10 3/4. The bulls' next upside price objective is to push and close July futures prices above solid technical resistance at the April high of US$5.65 a bushel.