May 15, 2007

 

US Wheat Outlook on Tuesday: 5-7 cents down on improved ratings, spillover

 

 

U.S. wheat futures are expected to start Tuesday's day session under pressure from improvements in winter wheat condition ratings and losses in the neighboring corn market, traders said.

 

Benchmark Chicago Board of Trade July wheat is called to open 5-7 cents lower per bushel.

 

In e-cbot overnight trading, CBOT July wheat fell 6 cents to US$4.90.

 

Prices slipped after the U.S. Department of Agriculture issued its weekly crop progress report, which rated 58% of the U.S. winter wheat crop in good-to-excellent condition, up one percentage point from last week. In Kansas, the nation's top wheat-producing state, 38% of the crop was in good-to-excellent condition, up one percentage point from a week earlier.

 

Conditions in several soft red winter wheat states also improved, with Illinois up 11 percentage points to 37% in the good-to-excellent category, while Ohio saw a six-percentage-point gain in the category from last week.

 

The improved ratings show wheat continues to bounce back after a hard Easter weekend freeze, a CBOT floor trader said. Initial reports had indicated many plants would not be able to recover from the cold, but wheat is "very resilient," he added.

 

Ideas that the improvements will lead to a big yield this year are negative for prices, traders said.

 

In another bearish development, spring wheat seedings were ahead of schedule with 87% of the crop planted as of May 13. That compares to 76% last year and the five-year average of 74%.

 

The spring wheat crop is "off to an excellent start," an analyst said.

 

In the neighboring CBOT corn market, the USDA's crop progress report said planting was 78% completed, which was above trade estimates. Soybean plantings also exceeded expectations, and weakness in those markets should weigh on wheat, CBOT floor traders said.

 

Bulls' next upside price objective is to close CBOT July wheat above solid resistance at the February high of US$5.18, a technical analyst said. The next downside price objective for the bears is closing prices below solid support at last week's low of US$4.78.

 

First resistance is seen at US$5.00 and then at Monday's high of US$5.03 1/2. First support lies at Monday's low of US$4.91 1/2 and then at US$4.87.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing July wheat above solid chart resistance at US$4.90, the technical analyst said. The bears' next downside objective is closing prices below solid support at last week's low of US$4.71.

 

First resistance is seen at US$4.85 and then at Monday's high of US$4.88. First support is seen at Monday's low of US$4.76 1/2 and then at US$4.71.

 

Weather in the U.S. Southern Plains should remain cool and wet Tuesday before turning drier Wednesday, according to DTN Meteorlogix. Moist soil and cooler temperatures favor developing wheat, although the conditions could lead to more disease, the weather firm said.

 

In central China, conditions in the North China Plain will stay drier than normal and sometimes hot during the next seven days, which will increase stress to winter wheat, Meteorlogix said.

 

In Australia, showers during the week appear to be heaviest over New South Wales. Most areas still need rain to help replenish soil moisture for early wheat growth, according to Meteorlogix.

 

Any shower activity in the Ukraine during the next seven days will be light and mainly confined to the west, the weather firm said. Rainy weather in Europe, meanwhile, continues to replenish soil moisture after dry April weather, Meteorlogix said.

 

In other news, Japan said it is seeking 130,000 metric tonnes of wheat in a routine tender to be concluded Thursday for delivery between June 21 and July 20.