June 2, 2008

US Wheat Outlook on Monday: Firmer to start on short covering

U.S. wheat futures are seen opening the trading session at higher levels Monday on short covering and some bargain-hunting buying following recent downside price pressure, an analyst said. Prices are called to open up 4 to 6 cents.

In overnight electronic Chicago Board of Trade activity, July Chicago wheat last traded up 5 1/2 cents at US$7.67 a bushel.

The first trading day of the month may also find some fresh speculative buying interest entering the wheat futures pits, said the analyst. The key "outside markets" are in a neutral posture for grains on Monday, he said. Gold is higher, crude oil lower and the U.S. dollar is firmer.

Weather in the U.S. central and southern Plains wheat regions is expected to be mostly dry to start the week. There will be a few widely scattered showers in the south, with showers and thunderstorms across Kansas and southern Nebraska. Temperatures will range from 80 to 98 degrees Fahrenheit.

Dow Jones Newswires reported overnight that Russia's wheat harvest this year will exceed 50 million metric tonnes, which is 10% above the 2007 production, according to the Russian agriculture ministry. Dow Jones Newswires also reported that China's wheat production is likely to reach a record high level in 2008, according to the country's ministry of agriculture.

Reports overnight said Saudi Arabia, which is typically self-sufficient on wheat, is likely to start importing the grain in the third quarter of this year, according to wheat traders in the country. The effort will reportedly be to increase domestic stocks and stabilize domestic wheat prices.

Technically, July Chicago wheat futures prices are still trapped below an 11-week-old downtrend on the daily bar chart. The bulls' next upside price objective is to push and close July futures prices above technical resistance at US$8.00 a bushel. The next downside price objective for the bears is pushing and closing prices below technical support at US$7.00 a bushel.

For July Kansas City wheat, an 11-week-old downtrend is also in place on the daily bar chart. The bulls' next upside price objective is pushing and closing prices above solid technical resistance at US$8.52 a bushel. The bears' next downside objective is pushing and closing prices below solid technical support at US$7.50.