May 20, 2009

 

US Wheat Outlook on Wednesday: Seen 2-4 cents higher on spillover

 

 

Spillover support is expected to lift U.S. wheat futures slightly higher at the start of Wednesday's day session, although the markets could trade both sides amid a lack of fresh news, traders said.

 

Chicago Board of Trade July wheat is called to open 2 to 4 cents per bushel higher. In overnight electronic trading, CBOT July wheat rose 3 3/4 cents to US$5.92 1/2.

 

Wheat should feel some borrowed strength from expected gains in neighboring CBOT soy and corn markets, a floor trader said. It wouldn't be surprising to see wheat trade lower if the neighboring markets weaken or hold only modest gains, he said.

 

Outside markets look mildly supportive for the grains, with crude oil rising and the U.S. dollar slipping, traders said. A weak dollar makes U.S. wheat more attractive to foreign buyers.

 

The markets continue to watch weather in the northern U.S. Plains, where cool, wet conditions have delayed spring wheat planting. Seeding should "increase rapidly this week" due to warmer, drier weather, WSI AgTrader said in a forecast.

 

Still, "periods of unsettled weather continue to delay spring planting" in the northern Plains, private weather firm DTN Meteorlogix said in a forecast. The firm expects mostly dry conditions in central and northwestern areas and scattered showers and thundershowers across far southern and southeastern areas Friday through Sunday.

 

Slow spring wheat planting had been lending some support to wheat. However, if the crop gets planted in North Dakota and Minnesota - the top two spring wheat-growing states - "it will take everything the dollar and the soybeans have to keep it from selling off," said Mark Gold, analyst for Top Third Ag.

 

Australia has received some beneficial moisture at planting time in northern New South Wales and southern Queensland, traders said. Rain is expected in West Australia, with "significant amounts" possible, Meteorlogix said.

 

There is some chatter about the threat of fungal diseases to U.S. soft red winter wheat following recent rains, a trader said. The U.S. needs to maintain a good quality crop for export business because there are ample supplies of wheat in the world, he said.

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below solid technical support at US$5.48, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.02 1/4, he said.

 

First resistance is seen at Tuesday's high of US$5.96 1/4 and then at US$6.00. First support lies at Tuesday's low of US$5.84 and then at US$5.80.