May 26, 2009

 

US Wheat Outlook on Tuesday: Seen down on outside markets, profit-taking

 

 

Bearish signals from outside markets and profit-taking are expected to pull U.S. wheat futures lower at the start of Tuesday's day session.

 

Chicago Board of Trade July wheat is called to open 6 to 8 cents per bushel lower. In overnight electronic trading, CBOT July wheat lost 6 1/2 cents to US$6.06.

 

Weakness in crude oil and equities and strength in the U.S. dollar should weigh on wheat, analysts said. CBOT corn and soybeans were lower overnight, as well.

 

"I think it's going to get caught up with this downside this morning in commodities," Tom Leffler, owner of Leffler Commodities, said about wheat.

 

The markets are "kind of due for a little profit-taking" after recent gains, he said. CBOT July wheat last week closed up 35 cents on the week.

 

Traders are waiting for the U.S. Department of Agriculture's weekly crop progress report, due out at 4 p.m. EDT, to see how much spring wheat was planted last week. Cool, wet weather in the northern U.S. Plains delayed seeding for weeks, but North Dakota - the top spring wheat-growing state - "made some progress before rains moved in" Monday, according to Country Hedging.

 

"Weekend rains will keep planting progress slow in an area where planting is already well behind normal due to early spring flooding," private weather firm DTN Meteorlogix said. "Some acreage will likely not get planted to wheat and will go over to oilseeds."

 

Rain that fell in Australia is "helpful" to farmers at planting time, an analyst said. Scattered rains, totaling 1/4 inch to 1 inch, fell through the driest areas of southeast South Australia and Victoria during the last part of the weekend, Meteorlogix said. The outlook for rainfall through winter in Australia, June through August, favors neither wetter nor drier-than-average conditions, according to the government's Bureau of Meteorology.

 

In other news, authorities in Egypt are satisfied that the Russian wheat being held at the port of Safaga is fit for human consumption, sources close to the matter told Dow Jones Newswires. A load of 52,501 tonnes of wheat quarantined earlier this month because of weed seeds and bug damage is awaiting Egypt's prosecutor to allow its discharge, they said.

 

Iraq, meanwhile, issued a new tender this weekend to buy at least 50,000 metric tonnes of hard wheat, according to an official at the Grain Board of Iraq. The closing date for receiving bids is May 31, and offers will remain valid until June 4. Iraq usually buys more wheat than the amount it requests in tenders.

 

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 Friday's high of US$6.18 and then at US$6.25. First support lies at US$6.00 and then at Friday's low of US$5.93.