May 12, 2009

 

US Wheat Outlook on Tuesday: Seen higher after USDA issues report

 

 

U.S. wheat futures are expected to start higher Tuesday on ideas government crop reports look supportive, but the markets may not be able to sustain gains, analysts said.

 

Chicago Board of Trade July wheat is called to open 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT July wheat rose 3 cents to US$5.93 3/4.

 

The "knee-jerk" reaction to U.S. Department of Agriculture supply/demand and production reports is that they are friendly for wheat, a CBOT floor trader said. The government pegged all winter wheat production at 1.502 billion bushels, compared with the average analyst estimate of 1.526 billion and last year's crop of 1.868 billion.

 

Hard red winter wheat production came in at 871 million bushels, compared with the average analyst estimate of 881 million, and soft red winter wheat production was seen at 422 million, compared with the average analyst estimate of 434 million. HRW wheat is used to make bread, and SRW wheat is used to make pastries and snack foods.

 

However, increasing world ending stocks "could limit the upside" in wheat, an analyst said. The USDA estimated 2008-09 world wheat ending stocks at 167.05 million tonnes, up from 158.1 million last month, and carryout for 2009-10 at 181.9 million.

 

"Wheat out of any grain traded probably has to reflect the world market more than any of them," the analyst said.

 

Wheat could come under pressure from some profit-taking after recent gains, an analyst said. It will keep an eye on neighboring markets, and CBOT corn should gain on wheat, a trader said.

 

The USDA's crop data were considered friendly for corn because old- and new-crop U.S. corn ending stocks came in below expectations, traders said. Delayed U.S. corn planting is another supportive feature for the corn market.

 

The next downside price objective for bears is pushing and closing CBOT July wheat below solid technical support at US$5.48, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.35, he said.

 

First resistance is seen at Monday's high of US$5.95 3/4 and then at US$6.00. First support lies at Monday's low of US$5.82 3/4 and then at US$5.75.

 

Conditions for hard red winter wheat in the central and southern Plains look "generally favorable," except in areas damaged by an early April freeze, DTN Meteorlogix said. It would be unfavorable for the crop if a wetter weather pattern continues, especially in the east, the private weather firm said.

 

There continue to be worries about slow planting of spring wheat, with 35% of the crop in the ground as of Sunday, down from the average of 78%. Cold weekend temperatures and wet weather early this week in the northern Plains mean further planting delays, especially in North Dakota, Meteorlogix said.

 

In Argentina, precipitation will help replenish soil moisture for wheat, but the driest areas of La Pampa and southwest Buenos Aires will see the least amount of moisture, according to Meteorlogix. Rain or thunderstorms during the next day or two appear heaviest over Cordoba, Sante Fe, north and east Buenos Aires, the firm said.