May 15, 2008

 

US Wheat Outlook on Thursday: Seen down on technical weakness, crop outlook

 

 

Expectations for a bumper world crop and technical weakness are expected to drive U.S. wheat futures into negative territory at the start of Thursday's day session, traders 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 closed 3 3/4 cents lower at $7.60 1/4.

 

Bearish outlooks for record world wheat production in 2008-09 continue to weigh on the markets, traders said. Output is expected to increase from 2007-08 because growers expanded plantings to take advantage of high prices.

 

"It looks like we have a decent crop," a broker said. "There is no fear."

 

There has been recent chatter about dryness concerns in Australia, which suffered from a severe drought for the past two years. However, there are bearish forecasts for rain in growing areas, traders said.

 

There is a chance for "significant shower activity" in Australia's New South Wales during the next 24 to 48 hours, DTN Meteorlogix said in a forecast. However, the chance for a big rain event in the western Victoria/southeast South Australia region has diminished.

 

"Rain is still needed in this area to support germination and early growth of wheat and to allow for more widespread planting," Meteorlogix said.

 

In the U.S., hard red winter wheat regions of the central and southern Plains look to turn drier and somewhat hotter during the next five to six days, according to Meteorlogix. That warmer, drier weather will begin to deplete available soil moisture for wheat, especially in the west, the private weather firm said.

 

Drier weather favors spring field work and planting in the U.S. northern Plains, Meteorlogix said. Still, the western areas still need rain, and the warmer to hotter weather will further reduce soil moisture, the firm said.

 

Weekly U.S. wheat export sales were solid but most of the business was for new crop, traders said. The U.S. Department of Agriculture reported sales of 120,700 tonnes for delivery in 2007-08 and 443,600 tonnes for delivery in 2008-09. Trade estimates had predicted total sales of 350,000 to 600,000 tonnes.

 

In other demand news, Jordan said it was tendering to buy 100,000 metric tonnes of wheat, of any origin, on a cost and freight basis. Japan, meanwhile, said it bought 60,000 metric tonnes of wheat, including 20,000 semi-hard U.S. wheat and 14,000 western white wheat, in a weekly tender concluded Thursday.

 

The markets should come under follow-through technical pressure after CBOT July wheat Wednesday fell below its 200-day moving average and closed at a fresh five-month low, analysts said. Prices remain in a two-month-old downtrend, and more damage has been inflicted on technical charts, a technical analyst said.

 

"The charts don't look good," a CBOT floor trader said.

 

The bulls' next upside price objective is to push and close CBOT July wheat above psychological resistance at $8.00, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below strong technical support at $7.50.

 

First resistance is seen at $7.77 and then at Wednesday's high of $7.90. First support lies at Wednesday's low of $7.63 and then at $7.50.