May 16, 2007

 

US Wheat Outlook on Wednesday: 1-2 cents down on e-CBOT, looking to neighbors

 

 

U.S. wheat futures are expected to start Wednesday's day session weaker, following losses overnight and with weather conditions seen as improving in some growing areas, traders said.

 

Benchmark Chicago Board of Trade July wheat is called to open 1-2 cents lower per bushel. In e-cbot overnight trading, CBOT July wheat ended down 1 cent at US$5.01.

 

Wheat will probably continue to look to other markets, including CBOT corn and soybeans, for direction, a CBOT floor broker said. There isn't much fresh news out for wheat, he added.

 

"We'll probably just flop around," he said.

 

There are still some concerns about the weather, although Australia is getting a drink of water, the broker noted. Showers and rain through Victoria and New South Wales in Australia will help recharge soil moisture for early wheat, although only light showers will fall elsewhere in the wheat belt, the DTN Meteorlogix weather firm said.

 

Growing conditions in the U.S. also look good going into harvest, a CBOT floor trader said. Drier conditions in the U.S. Southern Plains for the next three to four days will favor wheat, according to Meteorlogix. The region will see increasing thunderstorm activity and cooler temperatures during the five- to 10-day period, the weather firm said.

 

"Soil moisture and temperatures favor developing wheat, except that it could lead to more disease," Meteorlogix said.

 

There remain concerns about stress to Chinese winter wheat from dryness, traders said. The North China Plains in central China continues drier than normal and sometimes hot during the next seven days, according to Meteorlogix.

 

Any shower activity in the Ukraine during the next seven days will be mainly confined to the west, Meteorlogix said. Above-normal temperatures will increase stress to crops and reduce available soil moisture, especially in the central and east areas, the firm said.

 

The Ukraine has decided to abolish quotas for the export of milling wheat, according to the government press service. The Agriculture Ministry expects now grain exports in the current marketing year of 9.5 million metric tonnes, up from the previous forecast of 8 million tonnes.

 

In France, the 2007-08 wheat crops have recovered from a very dry April following recent rain, the managing director of the French state grains board said. Speaking at the board's monthly meeting, director said the country's production potential is unchanged because rainfall in the first 10 days of May offset the dry weather of April.

 

In other news, U.S. wheat traders are shrugging off news that Iraq has issued a new tender to buy 100,000 metric tonnes of wheat after U.S. and Canadian suppliers rejected a low-price counter offer sent to them by the Grain Board of Iraq, a CBOT floor broker said. Iraq usually tenders to buy small quantities of wheat but actually buys much more.

 

However, the board's counter offer shows it isn't willing to pay up for wheat, so the size of the tender isn't expected to be very big, an analyst added. Also, the tender first came awhile ago, the broker noted.

 

CBOT July wheat prices Tuesday closed nearer the session high and scored a bullish "outside day" up on the daily bar chart, a technical analyst said. Bulls have the near-term technical advantage and have gained upside technical momentum recently, he added.

 

The bulls' next upside price objective is to close CBOT July wheat above solid resistance at the February high of US$5.18. 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 Tuesday's high of US$5.07 1/2 and then at US$5.18. First support lies at US$5.00 and then at US$4.95.

 

Kansas City Board of Trade wheat futures led the upside Tuesday, and KCBT July wheat also scored an "outside day" up, the technical analyst Hard red winter wheat "showed the power it had to show to give all wheat bulls more confidence that more upside is in the cards," he said.

 

The bulls' next upside price objective is closing KCBT July prices above solid chart resistance at US$5.00. 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 Tuesday's high of US$4.93 and then at US$4.95. First support is seen at US$4.85 and then at US$4.80.