June 4, 2008

 

US Wheat Outlook on Wednesday: Seen mixed, following overnight trend

 

 

U.S. wheat futures are poised to start Wednesday's day session mixed after trading mixed overnight.

 

In overnight electronic trading, Chicago Board of Trade July wheat rose 1/2 cent to US$7.51 per bushel, while CBOT December wheat slipped 1/2 cent to US$7.89 1/4.

 

Wheat will probably continue to struggle to maintain moves to the upside, as the markets are focused on the idea that there is plenty of wheat around, a CBOT floor broker said. U.S. winter wheat harvest is continuing in the southern Plains and Delta, with reports of good quality so far.

 

Weather in the Plains is generally favorable for wheat, although there are reports of isolated damage from high winds and hail in parts of Oklahoma, industry members said. A deepening trough over the western U.S. is expected to drift into the central and southern Plains during the next few days, DTN Meteorlogix said.

 

The drifting trough should lead to widespread storms and less heat in the Plains, Meteorlogix said. It is still uncertain whether the driest areas in the region's southwest wheat belt will see storms, but affected areas should include a good portion of Kansas wheat country, the private weather firm said.

 

It is seen as bearish that Australian wheat areas have received a bit of rain in the last few days, although there are still some concerns about dryness there after two years of drought, traders said. Australia's eastern wheat areas may see more significant rain within the next five to seven days, Meteorlogix said.

 

CBOT corn and soybeans are expected to start lower, and their weakness could weigh on wheat, a trader said. Softer outside markets could add to the bearish tone, he said.

 

There are some lingering jitters about new policy initiatives issued Tuesday by the Commodity Futures Trading Commission, an analyst said. The agency, responsible for oversight and enforcement of U.S. futures and options markets, said it will demand more details about investors to determine whether they're evading market limits on speculation and causing food prices to escalate.

 

There are bearish perceptions the initiatives could limit fund buying, although the announcements were not considered surprising.

 

The bulls' next upside price objective is to push and close CBOT July wheat above technical resistance at US$8.00, a technical analyst 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, he said.

 

First resistance is seen at US$7.70 and then at Tuesday's high of US$7.82 1/2. First support lies at Tuesday's low of US$7.45 3/4 and then at US$7.30 3/4.