US Wheat Outlook on Thursday: Down on setback, but crop worries linger

 

 

U.S. wheat futures are poised to start lower Thursday in a setback from recent gains amid a lack of spillover strength, although continued crop worries could offer some support, analysts said.

 

Chicago Board of Trade July wheat is called to open 2 to 5 cents per bushel lower. In overnight electronic trading, CBOT July wheat dropped 5 cents to US$6.20 3/4.

 

The markets pulled back after CBOT and Kansas City Board of Trade July wheat hit nearly four-month highs on Wednesday. Minneapolis Grain Exchange July wheat hit an eight-month high on Wednesday.

 

Strength in the U.S. dollar is seen as a bearish influence for the markets, as it makes U.S. wheat less competitive for export business, a CBOT floor analyst said. Neighboring CBOT corn and soy also were under pressure overnight.

 

"Wheat prices took a hit along with corn and soybeans overnight, but with less of a recovery toward morning," Farm Futures analyst Arlan Suderman said. "Prices could feel additional pressure this morning as farmer selling increases following sharp gains in recent days. However, the longer-term trend remains higher until traders get a better feel for the size of this year's crop."

 

There are worries U.S. winter wheat "is not progressing as it should" following a decline in the U.S. Department of Agriculture's weekly crop condition rating, said Dennis Gartman, publisher of the Gartman Letter. There also are worries about delayed planting in Argentina, where it is dry, he said.

 

Delayed planting of spring wheat in the northern U.S. Plain is another concern and has helped nearby MGE wheat build a premium of more than US$1.50 over nearby CBOT wheat, an analyst said. Cool and excessively wet weather has been responsible for the lag in planting.

 

Drier conditions through Saturday in North Dakota, the top spring wheat-growing state, should allow for additional planting progress, according to private weather firm DTN Meteorlogix. After Saturday, the weather pattern looks wetter and cooler again, it said.

 

Showers in hard red winter wheat areas of the central and southern U.S. Plains will favor jointing-to-reproductive wheat through Colorado and Nebraska, Meteorlogix said in a forecast. "Mainly favorable conditions" are expected for reproductive-to-filling wheat in Kansas and for filling-to-maturing wheat in Oklahoma and Texas, the firm said.

 

The next downside price objective for wheat bears is pushing and closing CBOT July wheat below solid technical support at US$5.84 1/2, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.50, he said.

 

First resistance is seen at Wednesday's high of US$6.28 3/4 and then at US$6.34 1/4. First support lies at US$6.20 and then at Wednesday's low of US$6.10.

 

In other news, Japan said it bought 71,000 tonnes of wheat, including 50,000 tonnes from the U.S., in a routine tender concluded Thursday. The grain is expected to arrive July 15 to Aug. 14.