May 29, 2008

 

US Wheat Outlook on Thursday: Seen down on overnight, harvest pressure

 

 

Overnight weakness and the start of U.S. winter wheat cutting are expected to weigh on U.S. wheat futures at the start of Thursday's day session, analysts said.

 

Chicago Board of Trade July wheat is called to open 5 to 10 cents per bushel lower. In overnight electronic trading, CBOT July wheat stumbled 7 cents to US$7.52.

 

Harvest is underway in parts of Texas and Oklahoma, according to reports, and adding pressure to the markets amid expectations for a big U.S. crop, analysts said. Kansas producers said they expected to start cutting in mid- to late June, as cool weather has delayed development of the crop in some areas.

 

Aside from the harvest activity, there is a lack of fresh bullish news out for the markets, traders said. The U.S. Department of Agriculture is slated to release its weekly export sales report Friday, one day later than usual due to the Memorial Day holiday.

 

Wheat is considered technically weak after sliding this spring from all-time highs, traders said. Early losses in outside markets like crude oil and strength in the U.S. dollar are seen as bearish for the grains, they added.

 

CBOT July wheat "prices are still trapped below a 10-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 1/2, 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 this week's high of US$7.67 3/4 and then at US$7.76 1/2. First support lies at Wednesday's low of US$7.43 1/2 and then at last week's low of US$7.40 1/2.

 

Traders continue to watch global weather conditions for wheat, with the markets monitoring forecasts for precipitation in Australia. Drought has slashed Australia's wheat output for the past two years.

 

Some of rain may reach wheat areas of southeast Queensland in Australia in the near term, according to DTN Meteorlogix. The wheat areas of New South Wales, Victoria and South Australia stay mostly dry during the next seven days, the private weather firm said.

 

The chance for rain has ended for now in Argentina, as cold and dry air moves into the region, Meteorlogix said. The weather pattern favors wheat planting, but more rain will be needed to support germination and early growth, the firm said.

 

In other news, Jordan said it bought 50,000 metric tonnes of wheat in a tender. The purchases included 25,000 tonnes of Ukrainian wheat and 25,000 tonnes of optional origin wheat, both for shipment during the first half of August.