May 13, 2009

 

US Wheat Outlook on Wednesday: Seen up 4-6 cents on follow-through, spillover

 

 

U.S. wheat futures are poised to start firmer Wednesday on follow-through buying and spillover support from neighboring markets.

 

Chicago Board of Trade July wheat is called to open up 4 to 6 cents per bushel. In overnight electronic trading, CBOT July wheat gained 3 3/4 cents to US$5.96 1/2.

 

Wheat will likely look toward CBOT corn and soybeans for direction and "tag along" with them amid a lack of fresh fundamental news, said Larry Glenn, broker and analyst at Frontier Ag. Soybeans, which have been the upside leader lately amid worries about tight supplies, saw double-digit gains overnight, and corn also was higher.

 

Wheat recently "broke out a little bit to the upside" after trading sideways for weeks, but it isn't unusual for prices to rally ahead of the U.S. winter wheat harvest, Glenn said. The markets probably don't have "a lot more upside unless those fall crops get carried away," he said.

 

CBOT July wheat on Tuesday closed at a fresh three-month high. The contract is testing resistance at US$6, traders said.

 

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

 

First resistance is seen at US$5.97 1/2 and then at US$6.00. First support lies at Tuesday's low of US$5.79 1/4 and then at US$5.70.

 

Conditions are "generally favorable" for developing hard red winter wheat in the central and southern U.S. Plains, except in areas in the south damaged by an early April freeze, DTN Meteorlogix said. If a wetter weather pattern continues, it would become unfavorable for reproductive to filling wheat, especially in the east, the private weather firm said.

 

Minneapolis Grain Exchange wheat continues to find support from planting delays due to cool, wet weather. Rains returned to spring wheat areas of the northern U.S. Plains Monday and are expected to continue Tuesday, according to a forecast from WSI AgTrader. The weather should turn drier Sunday into early next week, the firm said.

 

In other news, Egypt's state prosecutor has ordered all Russian wheat in the country to be seized as it may not be fit for human consumption, the state news agency MENA reported Wednesday, according to news agency AFP. The prosecutor said the move followed a complaint that wheat had entered Egypt without the proper quality controls, and ordered tests on different wheat samples to decide whether it is fit for human consumption, MENA said.

 

Egypt is a major buyer on the world wheat market and imported a healthy quantity of low-cost wheat from the Black Sea region in 2008-09, despite chatter that some of it was of low quality. Egypt is considered to be a price-conscious buyer.

 

Japan, meanwhile, said it was seeking 86,000 tonnes of wheat, including 65,000 tonnes from the U.S., in a routine tender to be concluded Thursday. The shipment is expected to arrive July 1 to Aug. 10.