May 22, 2009

 

US Wheat Outlook on Friday: Up on spillover; choppy trade possible

 

 

Supportive outside markets are expected to boost U.S. wheat futures at the start of Friday's day session, although trading could be quiet and choppy ahead of the holiday weekend, traders said.

 

Chicago Board of Trade July wheat is called to open 4 cents to 6 cents per bushel higher. In overnight electronic trading, CBOT July wheat rose 6 1/2 cents to US$6.

 

Weakness in the U.S. dollar is seen as supportive to the grains because it makes them look more attractive to foreign buyers, traders said. Gains in crude oil and neighboring CBOT corn and soybeans overnight add support to wheat, they said.

 

The CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange will be closed Monday in observance of the U.S. Memorial Day holiday.

 

The quality of the U.S. soft red winter wheat crop remains somewhat of a question amid worries about the possibility of fungal diseases like Fusarium head blight, or head scab. The potential for quality issues due to wet weather "has to be monitored closely in coming weeks as the crop pushes through its reproductive phase," AgResource Company said in a market comment.

 

Some wet weather is expected to return to certain SRW wheat areas next week, according to private weather firm DTN Meteorlogix. Conditions should be mostly dry Sunday, with scattered showers in the western and southwestern Midwest, and mostly dry in northeastern areas Monday, with scattered showers in western and northern areas, the firm said.

 

In U.S. hard red winter wheat country, cutting has started in Texas and southern Oklahoma, according to reports. "Kansas lies ahead, and with it hedging pressure," said Dennis Gartman, publisher of the Gartman Letter. "If wheat can take this onslaught of hedge selling and hold firm we shall be very, very much impressed," he said.

 

Drier weather this week has allowed for improved spring wheat planting in the northern Plains. Moderate to heavy rain for early next week will further disrupt and delay planting progress, especially in areas that experienced early spring flooding like eastern North Dakota, Meteorlogix said.

 

In Australia, recent rains in Western Australia and New South Wales have helped farmers plant their winter grains, analysts said. Australia has traditionally been a major wheat exporter on the world market.

 

CBOT July wheat in overnight electronic trading hit a session high of US$6.03 1/2, just below its electronic high for the week of US$6.04 3/4. Once the contract breaks through the weekly high, "we can look for some decent upside progress, targeting US$6.46 1/4," according to FuturesTechs.

 

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 US$6.00 and then at this week's high of US$6.04 3/4 and then at US$6.10. First support lies at Thursday's low of US$5.84 1/2 and then at US$5.75.