June 8, 2007

 

US Wheat Outlook on Friday: Down 3-5 cents on overnight, spillover weakness

 

 

Spillover pressure from corn and follow-through overnight selling are expected to keep U.S. wheat futures on the defensive at the start of Friday's day session, floor traders said.

 

Benchmark Chicago Board of Trade July wheat is called to open 3 to 5 cents lower per bushel. In e-cbot trading, CBOT July wheat slipped 3 cents to US$5.21 1/2.

 

CBOT July wheat rose Thursday amid spillover buying interest from CBOT corn and soybean futures. Wheat on Friday should continue to seek direction from the neighboring markets, which stumbled overnight, traders said.

 

Commodity fund activity will also likely influence price direction, market participants said. The funds were strong buyers in corn Wednesday and picked up a lesser amount in wheat.

 

The trade is awaiting the release of the U.S. Department of Agriculture's June supply and demand report, due out at 8:30 a.m. EDT Monday. The report is slated to include new estimates for U.S. winter wheat production, U.S. old crop wheat carryout and new crop wheat carryout. There is great uncertainty, in particular, about soft red winter wheat production after a hard freeze hit the crop Easter weekend, a CBOT floor broker said.

 

Wheat bulls still have upside technical momentum, a technical analyst said. The bulls' next upside price objective is to close CBOT July wheat above solid resistance at the contract high of US$5.36, he said. The next downside price objective for the bears is closing prices below solid support at US$5.00.

 

First resistance is seen at Thursday's high of US$5.28 1/2 and then at US$5.36. First support lies at US$5.20 and then at Thursday's low of US$5.14 1/2.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing prices above solid chart resistance at this week's high of US$5.21, the technical analyst said. The bears' next downside objective is closing prices below solid support at US$4.90.

 

First resistance is seen at Thursday's high of US$5.13 1/2 and then at US$5.18. First support is seen at US$5.10 and then at US$5.05.

 

In other news, trade estimates that Argentina's 2007-08 wheat planting should be in line with, or actually higher, than last year due to a recent surge in wheat prices are bearish, an analyst said. Early forecasts had called for sharply lower plantings due to government wheat market intervention, which kept down spot prices, and higher fertilizer costs.

 

Argentina's planted area should be up 4% this season over 2006-07 due to favorable soil moisture conditions and strong prices for wheat, an AgriPac Consultores analyst predicted. Farmers are enthusiastic about the possibilities of wheat this year despite government manipulation of prices with last year's wheat crop, he said.

 

Argentina's southern winter wheat areas should be mainly dry or with only a few light showers for the southern winter wheat areas during the next five days, DTN Meteorlogix said. This will reduce soil moisture for early developing wheat.

 

There are ongoing fears about dryness in Ukraine, although the concerns have been factored into futures prices by now, CBOT floor traders said. The region from the east Ukraine and south Russia to the Black Soils region and the Volga valley may see a few scattered thundershowers this coming Monday, but overall there is still a very dry weather pattern for the region, according to Meteorlogix.

 

Hotter weather may develop later next week in Ukraine, but early indications suggest it will not be as hot as it was late last week. Crop stress will continue to build until general rain develops, Meteorlogix said.

 

Hot or very hot temperatures and mostly dry weather in central China will also deplete soil moisture there and increase stress to crops on the North China Plain, Meteorlogix said. In Australia, rainfall this week through southeast Queensland and northern New South Wales will help recharge soil moisture for wheat growth, the weather firm said.

 

In the U.S., periodic rainfall and episodes of warmer temperatures will favor developing spring crops, including wheat, on the Northern Plains. Thunderstorms may develop in some areas of the Southern Plains this weekend, Meteorlogix said.