June 1, 2009

 

US Wheat Outlook on Monday: Seen higher on strong outside markets

 

 

U.S. wheat futures are poised to start firmer Monday on strong outside markets and new money flowing into commodities, traders said.

 

Chicago Board of Trade July wheat is called to open 10 to 15 cents per bushel higher. In overnight electronic trading, CBOT July wheat jumped 12 3/4 cents to US$6.50.

 

Gains in CBOT soybeans and corn and in crude oil and equities should send supportive signals to wheat, a CBOT floor analyst said. A soft U.S. dollar adds strength as it makes U.S. wheat more competitive for export business, he said.

 

"The dollar's getting beat up," the floor analyst said.

 

Fund buying and short-covering could continue to boost prices following solid gains last month, a trader said. CBOT July wheat in May ended up US$1.00 3/4 on the month.

 

Non-commercial speculative funds continued to trim their net short position in CBOT wheat in the week ended May 26. They were net short 14,700 contracts, compared to a net short position of 18,473 contracts a week earlier, according to a supplemental report from the Commodity Futures Trading Commission.

 

Wheat bulls have the near-term technical advantage after the recent rally, a technical analyst said. However, the gains were overdone and markets are "due for a corrective pullback soon," he said.

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below solid technical support at US$6.00, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.50, he said.

 

There was a lack of fresh fundamental news out regarding the wheat markets, traders said. There continue to be worries about delayed planting of spring wheat in the northern U.S. Plains.

 

The U.S. Department of Agriculture will update its estimate on planting progress in its weekly crop progress report, due out at 4 p.m. EDT. As of May 24, 79% of the spring wheat crop was planted, down from the average of 95%.

 

Cool, wet weather in the northern Plains has delayed seeding this spring. Drier weather improves conditions for planting, but some spring wheat acreage in eastern North Dakota and northwest Minnesota will likely be shifted into corn and soybeans, according to private weather firm DTN Meteorlogix.

 

The USDA, in the progress report, also will issue updates on the condition of U.S. winter wheat and on the winter wheat harvest in select states. Scattered showers and thunderstorms in the southern U.S. Plains from Tuesday to Wednesday will be unfavorable for maturing hard red winter wheat crop and for the early harvest, Meteorlogix said.

 

In Argentina, where there are concerns about dryness, there were some showers through northern wheat areas during the weekend but conditions remained dry in the south, according to the weather firm. The region will stay "mainly dry and sometimes cold" during the next seven to 10 days, it said.

 

Australia should see light-to-moderate showers through southern Queensland and most of New South Wales early this week, which "will favor early growth of wheat," according to Meteorlogix. "These areas need more rain, despite some increase in rain during May," the firm said.