June 3, 2008

 

US Wheat Outlook on Tuesday: Seen 3-5 cents weaker on setback from gains

 

 

U.S. wheat futures are expected to start Tuesday's day session weaker in a setback from solid gains Monday and amid an absence of fundamental support, traders said.

 

Benchmark Chicago Board of Trade July wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT July wheat slipped 4 cents to US$7.78 1/2.

 

Technical buying Monday pushed wheat futures to double-digit gains, but the fundamental outlook for the markets is still bearish amid expectations for an increase in global production, traders said. Analysts have predicted the world will produce more wheat in 2008-09 than ever before due to expanded plantings and generally favorable growing weather.

 

The U.S. crop looks as though it's doing well in soft and hard red winter wheat areas, a CBOT floor trader said. The U.S. Department of Agriculture, in its weekly crop progress report Monday, said 47% of winter wheat was in good to excellent shape, unchanged from a week earlier.

 

Stress to HRW wheat should increase in the driest areas of southeast Colorado, extreme southwest Kansas and west Texas, as they will likely see little significant shower activity during the next 10 days, DTN Meteorlogix said. But the balance of the U.S. central and southern Plains should have favorable conditions for wheat, the private weather firm said.

 

Conditions for spring wheat in the Northern Plains look favorable, with periodic shower activity and no significant hot weather in the forecast, Meteorlogix said. The USDA raised its spring wheat good to excellent rating by five percentage points to 57%.

 

In Australia, at least 0.50-1.25 inch of moisture, with locally heavier totals, occurred through Queensland's wheat belt and at least the northern one third to one half of the New South Wales wheat belt during the past 48 hours, Meteorlogix said. The rain was much needed after the recent drying trend in the area.

 

On daily technical charts, wheat futures are still in an 11-week-old downtrend, a technical analyst said. The bulls' next upside price objective is to push and close CBOT July wheat above technical resistance at US$8.00, he said. The next downside price objective for the bears is pushing and closing prices below solid technical support at last week's low of US$7.30 3/4.

 

First resistance is seen at US$8.00 and then at US$8.09 1/2. First support lies at Monday's low of US$7.59 1/2 and then at US$7.48 1/4.

 

In other developments, there could be some longer-term support from news that Pakistan's federal government has approved a request from the provincial government of Punjab to import 2.5 million metric tonnes of wheat, a CBOT trader said. The purchase will be in addition to the 2.5 million tonnes the federal government decided to import a month ago.

 

Japan, meanwhile, said it was seeking 178,000 tonnes of wheat, including 86,000 tonnes of U.S. wheat, in a routine tender to be concluded Thursday. The shipment is expected to arrive in Japan from Aug. 1-31.