May 31, 2006

 

US Wheat Outlook on Wednesday: Down 2-4 cents on technical sales, US harvest

 

 

U.S. wheat futures were called to open down 2-4 cents Wednesday on follow-through technical sales and U.S. harvest pressure, brokers said.

 

"We had the market higher early yesterday and just couldn't sustain it," said Shawn McCambridge, a grain analyst at Prudential Financial.

 

"Today, we'll have to take a look at the fund participation, since it's quarter end, and then see if the market can stabilize," he added.

 

Early reports of some better-than-expected U.S. hard red winter wheat harvest yields have also been noted, he added.

 

"It's one of those situations where you can kind of hear anything that you want to," said McCambridge of the early harvest reports. "Expectations were extremely low going into the harvest time period. There are still poor yields coming out of the area for the most part, but quality is a little bit higher than what was expected when we went into the harvest time period.

 

"But I think the market is pretty content that current conditions are priced into the market," he added. "That's why we can't generate much follow-through (buying) interest."

 

The USDA reported Tuesday that 28% of the nation's winter wheat crop was in good-to-excellent condition, down 2 percentage points from last week's rating of 30% in that shape.

 

Kansas' crop was 49% in very poor to poor shape versus 44% in that condition the previous week.

 

"I don't think the crop ratings for winter wheat are very relevant at this point," McCambridge said. "Traders will take a look at them, but put more relevance on field reports. At this point what is out there is what we have."

 

The U.S. winter wheat crop was 79% headed as of Sunday, up from last year's 78% headed at this time, while 73% of the U.S. spring wheat crop was in good to excellent shape, down 3 percentage points from last week's 76% in that condition, the USDA said.

 

In the overnight e-CBOT session, most-active July wheat closed down 4 3/4 cents at US$4.07 1/4 per bushel.

 

"The wheat market has become tired at higher levels," said a technical source. "All of the bullish fundamental news appears to have been factored into the wheat market - especially when prices Tuesday closed lower and near the session low following a hot and dry weekend in the Plains. But bulls still have the overall technical advantage. The next upside price objective for the bulls is closing prices above solid longer-term resistance at the 2002 high of US$4.34 a bushel, basis nearby futures. It would take a close below solid support at US$4.00 to provide the bears with some fresh downside technical momentum."

 

First resistance for CBOT July wheat was seen at US$4.15 and then at US$4.20. First support was put at US$4.09 1/2 - Tuesday's low - and then at US$4.07.

 

Kansas City Board of Trade July wheat ended overnight down 4 cents at US$4.98 per bushel.

 

"Bulls still have the overall technical advantage, but a market top may be close at hand," the technical source said. "Look for higher volatility in the near term. The next major upside price objective for the bulls is closing prices above longer-term resistance at US$5.50 a bushel, basis nearby futures. A close below support at US$4.70 would provide the bears with some fresh downside technical momentum."

 

First resistance for KCBT July was seen at US$5.10 and then at US$5.17 - Tuesday's high. First support was seen at US$5.00 and then at US$4.91.

 

Cash U.S. hard red winter wheat basis bids were steady to firm Wednesday, with a 7-cent gain at the Texas Gulf; soft red winter wheat basis bids were mixed, with a 3-cent gain in Evansville, Ind., and a 7 1/2-cent loss in Michigan; and spring wheat basis bids were steady to firm, with a 5-cent gain in the Minneapolis rail bid, grain merchandisers said.