June 5, 2008

 

US Wheat Outlook on Thursday: Seen 3-5 cents up on corn, soy spillover

 

 

Follow-through buying from overnight and spillover strength are expected to nudge U.S. wheat futures higher at the start of Thursday's day session.

 

Benchmark Chicago Board of Trade July wheat is called to open 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT July wheat climbed 5 cents to US$7.58.

 

Wheat should get support from firm CBOT corn and soybeans, with both neighboring markets trading firmer overnight. Wheat needs support from corn and soy futures to climb due to its bearish fundamental outlook, an analyst said.

 

The start of U.S. winter wheat harvesting and expectations for a strong crop are considered bearish for wheat futures. World production is predicted to set a record in 2008-09 due to favorable weather and expanded plantings.

 

"Wheat's going to still be somewhat of a dog here, even if we do get some support from the corn and the soybeans," said Jerry Gidel, analyst for North American Risk Management Services.

 

Thunderstorms, with locally heavy rains and severe weather, may impact wheat-growing areas of Nebraska and Kansas during the five- to seven-day period, according to DTN Meteorlogix. Meanwhile, drier and hotter weather continues to put stress on wheat in the southwest and south Plains, the private weather firm said.

 

The U.S. Department of Agriculture said weekly U.S. wheat export sales totaled 237,800 tonnes, within trade expectations. Sales of 97,600 tonnes for delivery in 2008-09 for the week ended May 29 were "really not too impressive," after a steady early pace of new-crop business, Gidel said.

 

In other export news, Japan said it bought 153,000 tonnes of wheat, including 86,000 tonnes of U.S. wheat, in a tender concluded Thursday. The shipment is expected to arrive in Japan Aug. 1 to Aug. 31.

 

Bears have the near-term technical advantage in wheat, a technical analyst said. CBOT July wheat is still in an 11-week-old downtrend on the daily bar chart, he said.

 

The bulls' next upside price objective is to push and close CBOT July wheat above technical resistance at US$8.00, the 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 Wednesday's high of US$7.64 3/4 and then at US$7.82 1/2. First support lies at this week's low of US$7.45 3/4 and then at US$7.30 3/4.

 

The daily trading limit for Minneapolis Grain Exchange wheat futures remains expanded to 90 cents after the nearby July contract fell the 60-limit earlier this week. The wheat limit is 60 cents at the CBOT and Kansas City Board of Trade.