May 19, 2008

 

US Wheat Outlook on Monday: Seen firmer on corrective bounce

 

 

U.S. wheat futures are poised to start Monday's day session modestly firmer in a bit of a corrective bounce from recent sell-offs, traders said.

 

Benchmark Chicago Board of Trade July wheat is called to open 1 to 3 cents per bushel higher. In overnight electronic trading, CBOT July wheat was up 2 1/2 cents at US$7.78.

 

There is "a dearth of fresh news" for wheat, but the markets are rebounding a bit after weakness last week, a CBOT trader said. Wheat could slide to the downside again if CBOT corn tumbles Monday, he said.

 

There are some supportive concerns about dryness in Australia, although it is too early to panic about dry conditions there, a trader said. Market participants are watching the situation "with one eye open" following severe droughts in Australia the past two years, he said.

 

Rains of 0.25 inch to 1.00 inch, with locally heavier totals, fell through previously dry areas of southeast South Australia and western Victoria during the weekend, DTN Meteorlogix said. The precipitation will help replenish soil moisture for planting and developing wheat, the private weather firm said. However, the region looks to be dry during the next week or more.

 

In Argentina, western and southern wheat areas may see an increase in rainfall this week, Meteorlogix said. Rain is needed to help replenish soil moisture for planting, the firm said.

 

It will be hot Monday in hard red winter wheat areas of the U.S. central and southern Plains, but temperatures should then turn milder, Meteorlogix said. There are threats of showers in western areas later this week, and moisture would favor wheat, the firm said.

 

The U.S. Department of Agriculture is expected to update condition ratings for winter wheat in its weekly crop progress report due out at 4 p.m. EDT. The crop's good-to-excellent rating is seen unchanged to up two percentage points from 47% last week, traders said.

 

However, the markets don't care too much about the ratings for wheat because the crop looks like it is in generally good shape, traders said. The USDA will also issue an update on spring wheat planting in the report.

 

The bulls' next upside price objective is to push and close CBOT July wheat above psychological resistance at US$8.00, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below technical support at last week's low of US$7.49, he said. First resistance is seen at Friday's high of US$7.83 and then at US$7.90. First support lies at Friday's low of US$7.67 and then at US$7.49.