May 21, 2009

 

US Wheat Outlook on Thursday: Down in setback amid spillover pressure

 

 

U.S. wheat futures are poised to start weaker Thursday in a setback from gains and on pressure from losses in other markets, 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 dropped 4 cents to US$5.93 3/4.

 

Wheat is seen as a follower and will keep an eye on activity in neighboring CBOT soybeans and corn, a trader said. Nearby corn and soy contracts sagged overnight. Losses in crude oil and strength in the U.S. dollar also should weigh on the grains, he said.

 

"Wheat should follow the other markets lower, with traders trying to figure out if there's enough bullish around for futures to rally into harvest," Farm Futures analyst Bryce Knorr said. "Futures moved to new highs for the rally at all three exchanges yesterday but couldn't close above key psychological levels."

 

It wouldn't be surprising to see traders even up positions ahead of the three-day Memorial Day weekend, an analyst said.

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below solid technical support at US$5.63 1/4, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.34 1/4, he said.

 

First resistance is seen at Wednesday's high of US$6.04 3/4 and then at US$6.10. First support lies at Wednesday's low of US$5.85 3/4 and then at US$5.75.

 

"Bulls Wednesday gained the near-term technical advantage and good follow-through buying strength on Thursday or Friday would produce a bullish upside 'breakout' from the recent trading range," the technical analyst said.

 

Drier weather in the northern U.S. Plains improved conditions for planting spring wheat this week, private weather firm DTN Meteorlogix said. Some significant rain is indicated for early next week, "further disrupting and delaying planting," the firm said.

 

In other news, weekly U.S. wheat export sales of 563,500 tonnes were above expectations, which ranged from 200,000 tonnes to 450,000 tonnes. Net sales of 543,300 tonnes for delivery in 2009-10 were primarily for unknown destinations, which bought 145,000 tonnes, according to the U.S. Department of Agriculture.

 

A wheat export spat between Russia and Egypt continued, as the Russian federal food quality watchdog issued a statement late Wednesday saying it was convinced Russian grain seized recently by Egyptian authorities was of good quality. A 52,000-metric-tonne shipment of Russian wheat being delivered to Egypt's state-owned General Authority for Supply Commodities, or GASC, was seized over the past few days by Egyptian authorities on health concerns. There are also reports that two further ships carrying Russian grain have been quarantined by Egyptian inspectors.

 

Japan, meanwhile, bought 107,000 tonnes of wheat, including 86,000 tonnes from the U.S., in a routine tender concluded Thursday. The shipment is expected to arrive July 11 to Aug. 10.