May 14, 2009

 

US Wheat Outlook Thursday: Seen 6-8 cents down on weak demand, spillover

 

 

Sluggish export demand and spillover pressure from other markets should knock U.S. wheat futures lower at the start of Thursday's day session.

 

Chicago Board of Trade July wheat is called to open 6 to 8 cents per bushel lower. In overnight electronic trading, CBOT July wheat lost 7 1/2 cents to US$5.81 1/4.

 

Total weekly U.S. wheat export sales of 234,100 tonnes were "weak," a CBOT floor trader said, and at the low end of trade expectations of 200,000 tonnes to 450,000 tonnes. Sales of 102,600 tonnes for delivery in 2008-09 were down 60% from the previous week and 45% from the prior four-week average, according to the U.S. Department of Agriculture.

 

In other export news, Japan bought 86,000 tonnes of wheat in a routine tender, including 65,000 tonnes of U.S. wheat, concluded Thursday. The shipment is expected to arrive July 1 to Aug. 10.

 

Wheat should continue to be a follower of other markets amid a lack of unexpected fundamental news, a trader said. Neighboring CBOT corn and soybeans slipped overnight and are called to open lower.

 

Weakness in outside markets adds pressure to the grains, a CBOT floor analyst said. Crude oil and equities are expected to be lower.

 

Wheat closed in negative territory Wednesday, and it seemed the markets "ran out of steam" after recent gains, a trader said. CBOT July wheat hit a fresh three-month high Wednesday before pulling back.

 

The next downside price objective for the 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 US$6.02 1/4 and then at US$6.10. Support lies at US$5.79 1/4, he said.

 

There continue to be concerns about cool, wet weather delaying spring wheat planting in the northern U.S. Plains. Producers are not expected to make much planting progress this week due to waves of precipitation moving through the region, meteorologists said. Temperatures next week look warmer and more favorable for planting, according to a forecast from private weather firm DTN Meteorlogix.

 

Minneapolis Grain Exchange hard red spring wheat futures have found support from the planting delay and closed higher Wednesday, despite the losses at the CBOT. Higher-protein HRS wheat and hard red winter wheat, traded at the KCBT, should continue to gain on the CBOT, which trades soft red winter wheat, a trader said.

 

"I expect traders will continue to buy Minneapolis wheat and sell Chicago wheat until they are convinced the spring wheat will get planted," said Mark Gold, analyst for Top Third Ag.

 

In Argentina, soil moisture levels are still too low for many farmers to take a chance on planting wheat, despite moderate showers this week. The Buenos Aires Cereals Exchange is expecting wheat area to total 3.7 million hectares, down 18.6% on the year, but some analysts are forecasting an even bigger drop.

 

The next chance for showers in Argentina comes later in the 10-day period, Meteorlogix said. Moisture "is needed to help recharge soil moisture for germination and early growth of wheat," the firm said.