May 23, 2008

 

US Wheat Outlook on Friday: Up 2-4 cents on spillover, weak dollar

 

 

U.S. wheat futures are expected to open 2-4 cents a bushel higher on expected higher openings in Chicago soybeans and corn, with U.S. dollar weakness providing underlying support, traders and analysts said Friday.

 

Chicago Board of Trade wheat is also expected to bounce from Thursday's sharply lower close that took July down 33 cents to US$7.45 at the settlement. In overnight trade, CBOT July was up 2 3/4 cents to US$7.47 3/4 a bushel.

 

The grain and soy complex is expected to find outside price support from higher crude oil and precious metals futures, a trader said.

 

Trade is expected to be thin ahead of the Memorial Day weekend, however, as the markets will be closed Monday and many have already left for the long weekend. Pit trade will reopen Tuesday morning at 10:30 a.m. EDT.

 

While weather concerns continue for the Plains, Canadian Prairies, Argentina and Australia, the market's focus is on the bumper soft red winter wheat crop expected across the Midwest, said Arlan Suderman, market analyst with Farm Futures.

 

The larger crop and the calendar moving closer to harvest is expected to prevent rallies and may hold prices at the lower end of the recent range, the trader said.

 

In the U.S. hard red winter wheat areas, hot and mostly dry weather continues to stress filling wheat in northern Texas and southern Oklahoma, while thunderstorms and more seasonal temperatures favor Kansas and Nebraska wheat, DTN Meteorlogix said.

 

In the Midwest SRW region, rain and storms are forecast for the next week to 10 days and may lead to flooding in western areas. Showers to the south and east are not expected to be as heavy.

 

Spring wheat areas on the northern Plains will see widespread rain and storms, which will favor the crop, Meteorlogix said.

 

Widespread rain is urgently needed in Australia's New South Wales in order for planting intention projections to be realized, a state government report issued Friday said. Seasonal conditions continue to deteriorate in NSW and crop yields now depend on average winter and spring rain. The region typically accounts for 30% of Australia's output.

 

In other news, the Senate voted 82 to 13 to override President George Bush's veto of the 2008 Farm Bill, thus writing the new legislation into law. The bill upholds subsidies for corn, wheat and soybean producers, in addition to providing food assistance for low-income families. President Bush has said the bill should have done more to trim subsidies to large producers.

 

The Canadian Wheat Board lowered it 2008-09 price projections for wheat and durum, putting various wheats down CUS$23.00 per metric tonne from its April projection. The CWB cited the drop in futures markets and improving or stabilizing winter wheat conditions in the U.S., Europe and Black Sea region for the lower projections.

 

In export news, South Korean mills bought 22,000 tonnes of US No. 1 wheat for Aug. 20-Sept. 20 shipment.

 

Technically, CBOT July wheat remains trapped below a nine-week old downtrend line on the daily chart. Bulls' objective is to push prices above resistance at this week's high of US$8.09 1/2, while bears will try to press prices below support at US$7.00 a bushel, an analyst said.