May 13, 2008

 

US Wheat Outlook on Tuesday: Seen lower on overnight, lack of news

 

 

U.S. wheat futures are set to start Tuesday's day session lower following weaker trade overnight and a lack of fresh bullish news, analysts said.

 

Chicago Board of Trade July wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT July wheat slipped 1 1/2 cents to US$8.04.

 

Follow-through selling is expected to pressure wheat at the opening and then the markets will likely look for direction, an analyst said. Wheat lacks direction amid an absence of news, he said.

 

It was "friendly" for the markets that the U.S. Department of Agriculture on Monday left the good-to-excellent rating for U.S. winter wheat unchanged at 47%, as traders had been expecting to see a modest improvement from last week, said Vic Lespinasse, analyst for grainanalyst.com. However, weather for wheat looks generally favorable, which is bearish, Lespinasse said.

 

Conditions are favorable for jointing and heading hard red winter wheat in the central and southern Plains, DTN Meteorlogix said in a forecast. Frost and freeze conditions in western areas over the weekend weren't damaging as crop development is behind normal due to the region's cool spring, according to the private weather firm.

 

In spring wheat areas of the northern Plains, warmer weather favors planting and early growth in the west, while the east is somewhat cooler, Meteorlogix said. Conditions are expected to turn drier, but rain is still needed in the western areas, the firm said.

 

Wheat could come under pressure from outside markets, traders said. The U.S. dollar is firmer, while crude oil is weaker.

 

"That's a negative combination for the grains in general," Lespinasse said.

 

CBOT July wheat Monday closed firmer and near mid-range in quieter trading. Prices are in a two-month-old downtrend on the daily bar chart, a technical analyst said.

 

The bulls' next upside price objective is to push and close CBOT July wheat above solid technical resistance at last week's high of US$8.44, the analyst said. The next downside price objective for the bears is pushing and closing prices below strong technical support at the May low of US$7.77.

 

First resistance is seen at Monday's high of US$8.11 and then at US$8.28. First support lies at Monday's low of US$7.96 and then at US$7.91.

 

"The bears still have the overall near-term technical advantage after producing a bearish weekly low close on Friday," the analyst said.

 

In other news, dry weather in April has delayed planting of winter crops, including wheat, in eastern Australia, Rabobank Australia Ltd. reported Tuesday. Southwest New South Wales and Victoria remain "areas of concern" with little or no relief, and a dry April also delayed plantings in many other areas of eastern Australia, it said.