May 28, 2008

 

US Wheat Outlook on Wednesday: Down 10-12 cents on setback, harvest, spillover

 

 

U.S. wheat futures are poised to start Wednesday's day session weaker in a setback from recent gains and amid harvest pressure and spillover weakness from other markets, traders said.

 

Chicago Board of Trade July wheat is called to open 10 to 12 cents per bushel lower. In overnight electronic trading, CBOT July wheat dropped 10 3/4 cents to US$7.48 1/4.

 

CBOT July wheat is pulling back after climbing during the past two day sessions, a CBOT trader said. The market seems to be running out of steam after rising Tuesday on short-covering, he said.

 

The start of U.S. winter wheat cutting is bearish for the markets, an analyst said. Harvest is underway in parts of southern Texas and Oklahoma, according to crop dispatches. Elevators in Fort Worth, Texas, are getting their first shipments of harvested wheat reported average protein levels of 11.3% and test weights of 61 to 62 pounds per bushel, Country Hedging said in a note.

 

"U.S. harvest pressure and better yields are pressuring futures," the analyst said.

 

The U.S. Department of Agriculture raised its good-to-excellent rating for winter wheat to 47%, up two percentage points from a week ago. Kansas' crop was rated 49% good to excellent, up from 43% the previous week.

 

Hotter temperatures in the U.S. central and southern Plains should increase stress to wheat, especially in areas that are too dry, DTN Meteorlogix said. Affected areas should include Colorado, portions of west Kansas, and the Oklahoma and Texas Panhandle regions, according to the private weather firm.

 

The wheat markets don't have support from neighboring CBOT corn or soybeans, which were lower overnight with outside markets like crude oil and metals. Wheat is technically weak, with the markets stuck in a downtrend, an 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 1/2, a 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 Tuesday's high of US$7.67 3/4 and then at US$7.76 1/2. First support lies at Tuesday's low of US$7.52 1/2 and then at last week's low of US$7.40 1/2.

 

Traders continue to watch weather forecasts, with an eye focused on Australia, where drought has slashed output for the past two years. An upper level low over southeast Queensland means rain for mostly the sugarcane areas along the central and south coast of Queensland in Australia, according to Meteorlogix.

 

Some of this rain may reach inland to the wheat areas of southeast Queensland, Meteorlogix said. The wheat areas of New South Wales, Victoria and South Australia stay mostly dry during the next seven days, the weather firm said.