May 7, 2009

 

US Wheat Outlook on Thursday: Higher on outside markets, crop estimates

 

 

U.S. wheat futures are expected to open higher Thursday following overnight gains on supportive outside markets and crop projections that are a little lower than expected.

 

Benchmark Chicago Board of Trade wheat is called 4 to 6 cents higher. In overnight trade, CBOT July wheat was up 4 3/4 cents to US$5.63 1/2 per bushel and December wheat was up 6 3/4 cents to US$6.15.

 

Strength in outside markets, including crude oil and equities, will set the tone, analysts said.

 

"Wheat should be supported by the crop tour going on in Kansas," added Brian Hoops, president of Midwest Market Solutions. "I think they were looking for a little bit weaker and this may actually be smaller than what was expected."

 

During the first two days of the hard red winter wheat tour, sponsored by the Wheat Quality Council, participants surveyed a total of 427 fields and calculated an average yield of 40.6 bushels. That compares to the 43.3 bushels calculated during the first two days of the tour last year, when 357 fields were surveyed.

 

But a floor trader said the numbers were nothing for bulls to get too excited about, as the final results often "deviate considerably" from what is seen on the tour.

 

The market got some support Wednesday when Informa Economics projected the 2009 winter wheat crop at 1.535 billion bushels, which would be 333 million bushels below last year's total. A trader said the projection was friendly, and caused a "knee-jerk reaction" in the market.

 

Weekly net export sales totaled 386,300 metric tonnes for the week ended April 30, the U.S. Department of Agriculture said Thursday morning. Analysts had expected sales between 200,000 and 450,000 metric tonnes. Sales had totaled 251,200 tonnes the previous week.

 

Hoops said the trade expects demand to remain relatively light in upcoming weeks.

 

"Everyone wants to wait for that new crop to become available, and then they become a little more aggressive about buying that newly harvested wheat," he said.

 

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 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.

 

First resistance is seen at Wednesday's high of US$5.61 3/4 and then at this week's high of US$5.71 1/4. First support lies at this week's low of US$5.46 1/2 and then at US$5.40.