May 22, 2008

 

US Wheat Outlook on Thursday: Seen slightly up on overnight, spillover

 

 

Follow-through buying and strength in neighboring markets are expected to prop up U.S. wheat futures at the start of Thursday's day session, although early harvest activity should provide pressure, analysts 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 rose 3 cents to US$7.81.

 

Wheat could find some support from CBOT corn and soybeans, which were firmer overnight, an analyst said. A rally to new record highs in crude oil is seen as supportive for the grains and soy, he said.

 

However, CBOT July wheat prices Wednesday closed lower and near the session low despite gains in corn, soybeans and crude oil. It wouldn't be surprising to see wheat trade both sides as expectations for a big global harvest continue to weigh on the market, traders said. Winter wheat cutting already has begun in extreme southern areas of the U.S., they said.

 

"Seasonally, wheat should be in a downslope," an analyst said. "And it is."

 

The fact that wheat couldn't rally amid bullish "outside markets" and higher corn and soybean prices Wednesday shows "just how technically weak the wheat market is at present," a technical analyst said. "Prices are still trapped below a nine-week-old downtrend on the daily bar chart."

 

The bulls' next upside price objective is to push and close CBOT July wheat above technical resistance at this week's high of US$8.09 1/2, 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 Wednesday's high of US$7.94 1/2 and then at US$8.00. First support lies at this week's low of US$7.71 1/4 and then at US$7.49.

 

Weekly U.S. wheat export sales were within trade expectations. Total sales for the week ended May 15 were 492,400 metric tonnes, while analysts had expected business of 250,000 to 600,000 tonnes.

 

Old-crops sales were 98,300 tonnes, and new-crop sales were 394,100 tonnes, according to the U.S. Department of Agriculture. Sales of for delivery in 2008-09 were mainly for Brazil, which took 130,500 tonnes, and Mexico, which bought 87,000 tonnes, the USDA said.

 

In other export news, the Trading Corporation of Pakistan extended a deadline for bids in its purchase tender for 250,000 metric tonnes of wheat by a week, to June 14. The government also removed a 10% import duty on private wheat imports, in place since May 2006, to encourage private traders to import the grain.

 

Traders will continue to watch weather forecasts in Australia amid concerns about a lack of rain in some key growing areas. Any significant shower activity during the next seven to eight days will be mostly confined to the West Australia wheat belt, according to DTN Meteorlogix.

 

"Rainfall in this area will continue to favor early wheat growth," the private weather firm said. "Drier weather elsewhere in the region reduces soil moisture and increases stress to early developing wheat."

 

In the U.S. central and southern Plains, rainfall and cooler temperatures during the next few days will generally favor jointing to heading wheat, Meteorlogix said. However, the driest areas of the west and southwest may see more wind than rain, the firm said.