May 27, 2008

 

US Wheat Outlook on Tuesday: Seen 7-10 cents higher on tech buying, Australia

 

 

Australian weather concerns and technical buying are expected to push U.S. wheat futures higher at the start of Tuesday's day session, traders said.

 

Chicago Board of Trade July wheat is called to open up 7 to 10 cents per bushel. In overnight electronic trading, CBOT July wheat was up 9 cents at US$7.61 1/2.

 

Worries about the potential for another year of dry weather in Australia are supportive for the markets, as drought has slashed output down under for the past two years, an analyst said. Western Australia, which usually accounts for almost 40% of the country's wheat production, is expected to see beneficial moisture in the near term but may turn drier over the next three months, according to forecasts.

 

Australia's Bureau of Meteorology suggests patchy rainfall, which has been a feature over wheat lands during the past two months, will continue during the next three months. Given current conditions and forecasts, Rabobank lowered its Australian wheat production projection to 20 million to 24 million metric tonnes from 23 to 26 million tonnes.

 

"Rainfall is needed to help improve conditions for early wheat growth," DTN Meteorlogix said in a forecast.

 

In the U.S., frost and a light freeze in the northern Plains Tuesday morning should slow spring wheat growth and may affect some wheat in the coldest areas, Meteorlogix said. A more active rainfall pattern should help the crop recover from any cold weather problems, the private weather firm said.

 

Colorado's winter wheat areas and the panhandles of Texas and Oklahoma could use more rain to help plants recover from winter and spring dryness, Meteorlogix said. The balance of the Plains winter wheat should benefit from periodic showers and warm temperatures, the firm said.

 

U.S. wheat futures could find some support from technical buying, as the markets are in an oversold condition, a CBOT floor broker said. The markets are due for a bit of a bounce and should feel some spillover strength from gains in CBOT corn and soybeans, he said. However, ideas that the world will produce a large wheat crop in 2008-09 may exert some downward pressure on prices, he said.

 

"We'll look to see what the rest of the floor is doing," the broker said, referring to the CBOT grain floor.

 

CBOT July wheat prices Friday closed firmer and near mid-range after hitting a fresh six-month low early on. Prices are still trapped below a nine-week-old downtrend on the daily bar chart, a technical analyst said.

 

The bulls' next upside price objective is to push and close CBOT July wheat above technical resistance at last week's high of US$8.09 ½, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below technical support at US$7.00, he said.

 

First resistance is seen at Friday's high of US$7.59 1/2 and then at US$7.88. First support lies at Friday's low of US$7.40 1/2 and then at US$7.25.