May 8, 2008

 

US Wheat Outlook on Thursday: Seen higher on 'Cereal Connection'

 

 

U.S. wheat futures are expected to start Thursday's day session higher on ideas that there may be a pickup in demand, an analyst and trader said.

 

CBOT July wheat is called to open 4-6 cents higher per bushel. In overnight electronic trading, CBOT July wheat closed up 5 3/4 cents to US$8.13 1/4 a bushel.

 

The markets may be trying to trace a "cereal connection" between wheat and rice, the analyst said, noting that possible rice shortages may prompt a substitution of wheat. Rice shortage concerns have risen after Myanmar's cyclone devastated rice production areas this weekend.

 

Although prices were firmer overnight, bears still have the near-term technical advantage in the wheat market, an analyst said. First resistance for CBOT July wheat is seen at Wednesday's high of US$8.17 1/2 and then at US$8.25. First support lies at US$8.00 and then at US$7.91.

 

Traders are also waiting to see if Friday's supply and demand report from the U.S. Department of Agriculture offers any unexpected fundamental news.

 

Argentina's strike has been supportive in that it has pushed Brazil to purchase more U.S. wheat, but ultimately is seen as more supportive to corn and soybeans, a trader said.

 

Ample hard red winter wheat harvest expectations are "hanging over our heads," he added.

 

Based on Wednesday's field surveys, crop scouts on the 2008 Kansas Hard Red Winter Wheat Tour pegged the average yield at 41 bushels an acre, down slightly from the comparable figure of 43.2 bushels found on last year's tour.

 

Tour participants will compile the figures they've collected throughout the tour and release final production estimates for the Kansas HRW wheat crop Thursday.

 

Though the yield was down slightly this year, last year's average for the second day of the tour was the second highest since 2001, data showed. Most scouts said the wheat crop in many areas looked good and was most likely an average crop with potential for better-than-average production depending on future weather patterns.

 

Across the northern U.S. Plains, DTN Meteorlogix forecasts improving soil conditions for wheat, but maintains that cold weather may force some hard spring wheat replanting.

 

Across the central and southern Plains the firm sees crop development behind normal in all areas, and dry conditions continue through the southwest where dryland fields continue to suffer.

 

Of 161 CBOT May wheat contracts deliveries scheduled for May 9, Man Professional Clearing issued 117 contracts and J.P Morgan Futures stopped 67. No wheat deliveries were scheduled at the Kansas City Board of Trade or the Minneapolis Grain Exchange.

 

In other wheat news, grain prices are anticipated to fall as several major exporting countries such as the U.S., Brazil, Australia and Canada are likely to see bumper harvests. But Wednesday, World Bank President Robert Zoellick Rising said demand for food in the developing world and high energy prices will keep food prices from backing down anytime soon.

 

And commodities and investment guru Jim Rogers said he is still bullish on commodities, in particular agriculture, even as investors are regaining some confidence in the equities market and are hopeful that the worst of the U.S. subprime fallout is over.

 

Malaysia's Minister for Domestic Trade and Consumer Affairs Shahrir Samad said Thursday the country is stepping up rice stockpiling efforts and is considering building similar stockpiles in wheat and other essential commodities.