May 11, 2009

 

US Wheat Outlook on Monday: Seen lower on spillover, profit-taking

 

 

Pressure from weakness in other markets and profit-taking are expected to pull U.S. wheat futures lower at the start of Monday's day session.

 

Chicago Board of Trade July wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT July wheat lost 3 cents to US$5.88.

 

Expected losses in crude oil, stocks and CBOT soybeans should weigh on wheat, a trader said. Strength in the U.S. dollar is seen as bearish because it makes U.S. wheat less attractive to foreign buyers, he said.

 

Profit-taking is possible in the grains and soybeans following recent gains, a CBOT floor analyst said. CBOT July wheat ended up 21 cents on the week last week.

 

Some positioning ahead of the U.S. Department of Agriculture's May supply/demand and production reports also is expected, an analyst said. The reports, due out at 8:30 a.m. EDT Tuesday, will include the first estimates on 2009-10 world wheat production.

 

The average of analysts' estimates for the 2008-09 U.S. wheat carryout is 687 million bushels, down 9 million bushels from April, according to a Dow Jones Newswires survey of 12 analysts. The average of analysts' estimates for 2009-10 carryout is 653 million.

 

"Wheat should open lower this morning, as the market digests last week's gains ahead of the USDA report," Arlan Suderman, analyst for Farm Futures, said in a note.

 

CBOT July wheat on Friday hit a fresh three-month high. Wheat bulls have gained the overall near-term technical advantage, a technical analyst said.

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below solid technical support at US$5.48, the analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.69 3/4 a bushel.

 

First resistance is seen at Friday's high of US$5.92 and then at US$6.00. First support lies at the April high of US$5.84 1/2 and then at US$5.75.

 

There are still weather concerns about slow spring wheat planting in the U.S. northern Plains. Weekend cold temperatures and more wet weather early this week mean further planting delays, especially in North Dakota, according to DTN Meteorlogix.

 

The USDA will update planting progress at 4 p.m. EDT in its weekly crop progress report. It also will issue updates on wheat condition ratings.

 

In other news, concerns are mounting in Australia about dry conditions for some winter crop lands during what is now the key planting window, analysts said. The first 10 days of May has been dry for nearly all the nation's wheat lands with areas in Western Australia - which typically account for about 40% of the national output - suffering the most, according to Luke Mathews, a commodity strategist at Commonwealth Bank of Australia.