May 27, 2009

 

US Wheat Outlook on Wednesday: Seen up 4-6 cents on crop worries, spillover

 

 

Lingering crop worries, spillover support from other markets and fund buying are expected to support U.S. wheat futures at the start of Wednesday's day session.

 

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 5 3/4 cents to US$6.17 3/4.

 

Expected gains in CBOT soybeans and corn and in crude oil should lend strength to wheat, traders said. Lagging plantings of hard red spring wheat provide "more fodder for wheat bulls that have benefited from row crop price strength," said Rich Feltes, senior vice president of research for MF Global.

 

Cool, wet weather has delayed seeding in the northern U.S. Plains and raised concerns that producers will plant other crops, such as soybeans, instead of spring wheat. Time is running short for farmers to get the crop in the ground, a trader said.

 

The U.S. Department of Agriculture said that 79% of spring wheat was planted as of Sunday, up from 50% last week but below the average of 95%. North Dakota, the country's top spring wheat-producing state, had planted 69% of its crop, down from the average of 94%.

 

North Dakota should be mainly dry this week, with "up and down temperatures," following heavy showers Sunday in central and eastern areas, according to WSI AgTrader. Planting progress should continue this week, the weather firm said.

 

The USDA said 45% of U.S. winter wheat was in good-to-excellent condition as of Sunday, down from 48% last week. In hard red winter wheat states, Kansas saw its good-to-excellent rating fall to 47% from 54% last week, while Nebraska saw its good-to-excellent rating drop to 69% from 77% last week.

 

The declines were a bit of a surprise, an analyst said. However, it's not too unusual to see condition ratings drop as harvest begins, a trader said.

 

Elsewhere in the world, there are lingering worries about a lack of rain in Argentina and in Eastern Europe, a CBOT floor trader said. Dryness remains a worry for Australia, although some areas have seen moisture recently, he said.

 

Despite the crop concerns, world wheat ending stocks for 2008-09 and 2009-10 are expected to increase, according to the USDA. That is fundamentally bearish for the markets, an analyst said.

 

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. 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$6.19 3/4 and then at US$6.25. First support lies at US$6.02 1/2 and then at US$5.93, he said.

 

The markets are keeping an eye on the 200-day moving average for CBOT July wheat around US$6.22, a trader said. There is resistance in that area and around US$6.26, he said.