May 30, 2007

 

US Wheat Outlook on Wednesday: 1-2 cents firmer on overnight, ratings drop

 

 

Follow-through buying from the overnight and support from declines in crop condition ratings are expected to shove wheat 1-to-2 cents higher per bushel at the start of Wednesday's day session, traders said.

 

In e-cbot trading, Chicago Board of Trade July wheat rose 1 3/4 cents to US$4.92 3/4.

 

The U.S. Department of Agriculture, in its weekly crop progress report, cut the good-to-excellent condition rating of the U.S. winter wheat crop to 57% from 59% a week ago. In Kansas, the nation's top wheat-producing state, 37% of the crop was in good-to-excellent condition, compared to 40% a week ago, according to the USDA. Oklahoma's good-to-excellent rating dropped to 69% from 70% a week ago.

 

Wet weather in the Southern Plains is unfavorable for maturing wheat and any early harvesting, especially through Kansas, the DTN Meteorlogix weather firm said.

 

The USDA also decreased the good-to-excellent condition rating for U.S. spring wheat to 79% from 81% the previous week. The declines are seen as supportive to prices, particularly amid the continued concerns about excessive precipitation in the Central and Southern Plains, a CBOT floor broker said.

 

Overseas, Ukraine said it was suspending grain exports until state reserves are built up, although it will allow the export of 900,000 metric tonnes of grain already held by traders. The suspension is due to a drought, which threatens to destroy at least one third of grain crops.

 

It is unclear how much of the grain is wheat, but news of the suspension of exports is still friendly to prices, a CBOT floor trader said. Ukraine "is a major exporter," he said. "It's a situation we have to watch closely."

 

The much drier-than-normal weather pattern will continue for the east Ukraine and south Russia, according to Meteorlogix. The hottest weather shifted east of Ukraine yesterday but may return during the next few days, the firm said. Western Ukraine had thunderstorms yesterday and is not as dry overall.

 

In central China, widespread shower and thunderstorm activity will help to replenish soil moisture for crops, although more rain will be needed after the recent hot spell, Meteorlogix said. There is some bullish talk among floor traders about possible U.S. wheat sales to China, the CBOT floor trader said.

 

Australia, meanwhile, saw showers of 0.10-0.60 inch, with higher local totals, through Victoria, and in south and central New South Wales during the past 24 hours, the weather firm said. The outlook calls for drier conditions during the 5 day period.

 

In Argentina, conditions will stay mainly dry during the next five to seven days, favoring planting while reducing available soil moisture for wheat, Meteorlogix said.

 

In other news, India's State Trading Corp Wednesday scrapped a tender to import up to 1 million metric tonnes of wheat due to the high prices in the bids it received, a government official said. STC issued a tender to import wheat on behalf of the government on Apr. 30.

 

The bulls' next upside price objective is to close CBOT July prices above solid resistance at last week's high of US$5.02, a technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$4.80.

 

First resistance is seen at US$4.95 and then at US$5.00. First support lies at Tuesday's low of US$4.88 1/2 and then at US$4.85.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing July prices above solid chart resistance at the May high of US$4.93, the technical analyst said. The bears' next downside objective is closing prices below solid support at US$4.70.

 

First resistance is seen at US$4.85 and then at Tuesday's high of US$4.88. First support is seen at Tuesday's low of US$4.79 1/2 and then at US$4.75.