June 3, 2009

 

US Wheat Outlook on Wednesday: Seen lower on outside pressure, setback

 

 

Pressure from outside markets and profit-taking are expected to weigh on U.S. wheat futures at the start of Wednesday's day session.

 

Chicago Board of Trade July wheat is called to start 10 to 15 cents per bushel lower. In overnight electronic trading, CBOT July wheat dipped 12 cents to US$6.57 1/2.

 

Strength in the U.S. dollar and expected losses in equities and in crude oil will probably keep wheat in negative territory, said Larry Glenn, broker and analyst at Frontier Ag. CBOT soybeans and corn also are called to start lower after stumbling overnight.

 

The markets could consolidate and traders could take some profits after fund buying and supportive outside markets sparked a rally to eight-month highs Monday, analysts said. Prices pulled back a bit Tuesday but closed above session lows.

 

"We've had a good run," Glenn said. "To me, we're due for a correction in the market."

 

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. 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 this week's high of US$6.77 and then at US$7.00. There is a support area at US$6.50, the analyst said.

 

There was little fresh fundamental news out to move the markets, traders said. Weather continues to be an issue in growing areas around the world, but there is still a lot of wheat available, traders said.

 

In hard red winter wheat areas of the U.S. Great Plains, conditions look favorable for heading and filling wheat in the north, private weather firm DTN Meteorlogix said. Scattered showers and thunderstorms in the south are unfavorable for the maturing crop and the early harvest, it said.

 

Cool-to-cold and damp-to-wet weather will continue to delay field work and any late planting of spring wheat through southern and eastern areas of the northern U.S. Plains, Meteorlogix said. The weather should slow development of planted crops, the firm said.

 

Dryness remains a concern in Argentina, traders said, with Meteorlogix predicting the region will stay mainly dry and sometimes cold during the next seven days. Rain is needed to support early growth of wheat, especially in western crop areas, according to the firm.

 

Light-to-moderate showers will favor early growth of wheat through southern Queensland and most of New South Wales in Australia, Meteorlogix said. There are chances for beneficial showers and a little light rain elsewhere in the wheat areas during the next five days, although more will be needed, according to the firm.