May 16, 2006

 

US Wheat Outlook on Tuesday: Down 2-4 cents on crop ratings, technicals

 

 

U.S. wheat futures were called to open down 2-4 cents per bushel Tuesday on an improvement in both Kansas and the overall U.S. winter wheat crop's condition and lingering technical sales due to overbought chart signs, brokers said.

 

Losses in Kansas City Board of Trade hard red winter wheat futures could be limited Tuesday as forecasts called for hotter temperatures for 10-15 days beginning on Friday, they noted.

 

Brokers also noted the Chicago Board of Trade boosted its wheat and mini-sized wheat margin requirements effective with Tuesday's evening session amid the recent heightened volatility.

 

The new initial/maintenance/hedge margins for wheat are US$743/US$550/US$550; the new initial/maintenance/hedge margins for mini-sized wheat are US$149/US$110/US$110.

 

In the overnight e-CBOT session, most-active July wheat closed down 4 cents at US$3.95 1/2 per bushel. The 9-day relative strength index was 71 early Tuesday, above the overbought level of 70.

 

"Bulls still have solid technical power," a technical source said. "The next upside price objective for the bulls is closing prices above solid resistance at the contract high of US$4.11 a bushel. It would take a close below solid support at US$3.82 to provide the bears with fresh downside technical momentum."

 

First resistance for CBOT July wheat was seen at US$4.04--Monday's high--and then at US$4.11. First support was put at US$3.95 3/4--Monday's low--and then at US$3.92 1/2.

 

Preliminary open interest data suggested CBOT wheat open interest had reached a new record after Monday's trade. The CBOT announced preliminary open interest for CBOT wheat futures up 11,888 lots to 471,975 contracts, after Monday's record of 460,087 lots.

 

Kansas City Board of Trade July wheat ended overnight down 3 1/4 cents at US$4.77 per bushel. The 9-day relative strength index was 73 early Tuesday, above the overbought level of 70.

 

"Bulls still have the solid technical advantage," a technical source said. "Look for higher volatility in the near term. The next major upside price objective for the bulls is major psychological resistance at US$5.00 a bushel. A close below the support at US$4.50 would provide the bears with fresh downside technical momentum."

 

First resistance for KCBT July wheat seen at US$4.81--Monday's high--and then at US$4.87. First support is seen at US$4.73--Monday's low--and then at US$4.65.

 

There were no deliveries posted Tuesday against expired CBOT May wheat futures and registrations remained at 1,676 lots.

 

The U.S. winter wheat crop was 36% in good-to-excellent condition as of Sunday, up 1 percentage point from last week's rating of 35%, the U.S. Department of Agriculture said late Monday.

 

Thirty-eight percent of the U.S. winter wheat crop was in very poor to poor condition, on par with last week's 38%. The crop was 62% headed, up from last year's 55% and the average pace of 55%.

 

The above-average headed pace in Missouri, Kansas, Texas and Oklahoma showed the crop was advancing rapidly, which is a telling sign that crop is stressing, said Shawn McCambridge, a grain analyst at Prudential Financial.

 

The crop in top U.S. hard red winter wheat producing state of Kansas was 25% in good-to-excellent shape as of Sunday, compared with 23% last week.

 

The USDA also reported Monday that 79% of the U.S. spring wheat crop had been planted, behind last year's 88%, but ahead of the five-year average of 72%.

 

North Dakota, the top U.S. spring wheat growing state, was 72% planted, lagging behind last year's 83% pace, but ahead of the five-year average for the state of 62%, according to the USDA.

 

Forty-six percent of the U.S. crop was reported emerged, down from last year's 53% but above the five-year average of 42%.

 

Cash U.S. hard red winter wheat basis bids were mostly steady to firm; soft red winter wheat basis bids were mixed, with a 3-cent loss in Evansville, Ind.; and spring wheat basis bids were steady to weak, grain merchandisers said.

 

In wheat export news, Japan sought 145,000 tonnes of wheat including 60,000 tonnes of U.S. wheat. Syria canceled a tender to sell 50,000 metric tonnes of wheat due to unacceptable prices.