June 2, 2009

 

US Wheat Outlook on Tuesday: Seen down on setback; eyes dollar, funds

 

 

U.S. wheat futures are expected to start lower Tuesday in a pullback from strong gains Monday, although traders are keeping an eye on the U.S. dollar and money flows for direction.

 

Chicago Board of Trade July wheat is called to open 5 to 7 cents per bushel lower. In overnight electronic trading, CBOT July wheat slid 9 cents to US$6.65 1/2.

 

Profit-taking should weigh on wheat in a "Turnaround Tuesday" scenario after the markets soared to eight-month highs Monday, a CBOT floor analyst said. The rallies were "overdone," he said.

 

Weakness in the U.S. dollar is tempering calls a bit, a trader said, after a drop in the dollar helped fuel Monday's surge. Traders also are waiting to see whether fund buying, which has boosted prices recently, returns to the markets, he said.

 

CBOT soybeans and corn were down overnight with wheat. Crude oil was modestly lower ahead of the grains opening.

 

There is not much fresh news out to change the fundamental picture for wheat, traders said. U.S. soft red winter wheat looks as though it's still in "pretty good shape," despite worries about the threat of fungal diseases, a CBOT trader said.

 

The U.S. Department of Agriculture, in its weekly crop progress report, rated 45% of U.S. winter wheat as good to excellent, down two percentage points from last week. The condition rating was expected to decline a bit, an analyst said.

 

U.S. spring wheat was 89% planted as of Sunday, down from 100% last year and the average of 98%, according to the USDA. In North Dakota, the biggest spring wheat-growing state, planting was 82% complete, down from 100% last year and the average of 97%, according to the USDA.

 

Excessively wet and cool weather has slowed seeding this season, but high prices will encourage producers to put the rest of the crop in the ground, traders said.

 

North of the border, warmer-than-normal temperatures in Alberta and western Saskatchewan allowed for good seeding progress to be made by producers, according to the Canadian Wheat Board. The planting of the various grain and oilseeds crops in western Canada was estimated at 92% complete, the CWB said.

 

In Australia, favorable rains in May boosted production expectations for this year's wheat crop, although the growing season has only just begun, Rabobank Australia Ltd. said. There are still concerns about dryness in Argentina, which is expected to stay mainly dry and sometimes cold during the next seven to 10 days, according to private weather firm DTN Meteorlogix.

 

In other news, Japan said it won't hold its weekly wheat import tender this week.

 

The next downside price objective for bears is pushing and closing CBOT July wheat below solid technical support at US$6.00, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$7.00, he said.

 

First resistance is seen at Monday's high of US$6.77 and then at US$7.00. First support lies at US$6.70 and then at US$6.60.