May 7, 2007

 

US Wheat Outlook on Monday: 1-3 cents higher on overnight, corn spillover

 

 

U.S. wheat futures are expected to start Monday's day session modestly higher following overnight gains and with spillover support from the corn market, analysts said.

 

Benchmark Chicago Board of Trade July wheat is called to open 1 to 3 cents higher per bushel.

 

In e-cbot trading, CBOT July wheat rose 1 cent to US$4.82.

 

CBOT corn was seen as the leader overnight and rose on heavy rains in the western U.S. Midwest over the weekend, analysts said. Dry weather in Australia could also get some attention from the wheat market, although recent rains in Europe may offset support, said Chad Henderson, analyst with Prime Agricultural Consultants.

 

CBOT July wheat will struggle to find much new buying interest above US$5 as that has traditionally been a key level of resistance and a point at which demand interest diminishes, traders said. The July contract closed below US$5 last week, ending at US$4.94 3/4.

 

"I don't know if there's enough of a bullish catalyst out there to get this going," Henderson said about the wheat market. "Corn's really going to have to get hot."

 

The wheat trade also will be looking toward the release of the U.S. Department of Agriculture's crop progress report on Monday afternoon, with expectations that the winter wheat crop may improve from a week ago, a CBOT floor broker said. The USDA reported last week that 56% of the crop was in good-to-excellent condition as of April 29, up two percentage points from the previous week and well above the 36% recorded last year.

 

A hard spring freeze damaged hard red winter wheat in central growing areas of Kansas, the nation's top hard red winter wheat-producing state, but plants in the western third of the state are doing well.

 

"If the crop is going to get better, it's probably going to put some overhead resistance above" wheat prices, Henderson said.

 

However, it is still a long way until harvest, a CBOT floor trader said. Widespread thunderstorm activity and warm temperatures in the U.S. Southern Plains means an increased risk for significant disease problems for wheat, according to DTN Meteorlogix. In addition, some flooding of fields is possible due to the heavy rain associated with strong storms, the weather firm said.

 

A technical analyst said the bulls' next upside price objective is to close CBOT July prices above solid resistance at US$5.08. The next downside price objective for the bears is closing prices below solid support at last week's low of US$4.84.

 

First resistance is seen at Friday's high of US$4.97 and then at US$5. First support lies at Friday's low of US$4.89 and then at US$4.84.

 

Non-commercial speculative traders increased long and short CBOT wheat futures and options position in the week ended May 1, according to the Commodity Futures Trading Commission. Traders lifted longs by 5,393 lots and shorts by 5,475 lots, the CFTC said in supplemental reports. They went net short 6,701 contracts.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing July wheat above solid chart resistance at US$5, the technical analyst said. The bears' next downside objective is closing prices below solid support at last week's low of US$4.76 1/2.

 

First resistance is seen at US$4.88 1/2 and then at US$4.91. First support is seen at US$4.80 and then at US$4.76 1/2.

 

Speculative traders cut long KCBT wheat futures and options positions by 1,323 lots and increased shorts by 3,420 lots, the CFTC said. They were net long 9,469 contracts.

 

In other news, wheat purchases in 2007 by India's federal government from farmers are estimated at 8.81 million metric tonnes as of Monday, down 3.29% from 9.11 million tonnes a year earlier, a senior food ministry official said. The government has enough wheat stocks to meet local demand until Mar 31, 2008 and is in the process of building-up a buffer stock, he said.

 

Tunisia's state-run Office Des Cereales, meanwhile, said Monday that it bought 42,000 metric tonnes of soft wheat for shipment June 1-10, on a cost and freight basis. The wheat is of Black Sea origin and was bought in a tender that closed Friday, an official at the office told Dow Jones Newswires. The official didn't disclose the price at which the wheat was purchased.