June 9, 2008

 

US Wheat Outlook on Monday: Seen 15-18 cents firmer on spillover, wetness

 

 

U.S. wheat futures are expected to start Monday's day session higher on borrowed strength from neighboring markets and concerns about excessive wetness.

 

Benchmark Chicago Board of Trade July wheat is called to open 15 to 18 cents per bushel higher. In overnight electronic trading, CBOT July wheat jumped 17 1/4 cents to US$8.28 1/4.

 

Wheat should continue to feel spillover support from gains in CBOT corn and soybeans, which have been a bullish influence on the golden grain recently, said Tom Leffler, owner of Leffler Commodities. The row crops rose overnight amid worries that heavy rains lowered yields.

 

Wheat is "getting artificially supported," Leffler said.

 

Concerns about wetness extend into the wheat markets, as significant precipitation hit growing areas of the Midwest and Plains during the weekend, traders said. Hard red winter wheat growers in the Plains may be a little jittery about wet conditions because they remember how heavy rains at harvest time lowered output last year, Leffler said.

 

However, growers this year have already harvested more of the crop than they did last year before the rains came, Leffler said. Yields are quality so far have been generally solid, according to reports.

 

DTN Meteorlogix said wet weather will "impact maturing winter wheat and the increasing harvest in Texas, Oklahoma and Kansas. It will favor filling wheat in Colorado and Nebraska."

 

In spring wheat areas of the Northern Plains, another round of rain and thunderstorms will continue to build moisture for wheat, Meteorlogix said. But the moisture may lead to some local flooding, the private weather firm said.

 

In other news, dry weather continues to slow Argentina's wheat planting, with 19% of the crop in the ground as of June 6, down 7 percentage points from last year. Farmers in many areas have been switching to shorter cycle wheat as the period for planting long-cycle wheat is passing, the Agriculture Secretariat said in a weekly crop report.

 

Looking at technical charts, wheat has found support now that the CBOT July contract has bounced above US$8, a CBOT floor trader said. Some short-covering is helping the markets rebound after sharp losses during the past few months, he said.

 

Bulls on Friday gained fresh upside technical momentum and produced a bullish upside "breakout" from a sideways trading range at lower price levels, a technical analyst said. The bulls' next upside price objective is to push and close CBOT July wheat above technical resistance at US$8.50, he said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$7.75, he said.

 

First resistance is seen at Friday's high of US$8.29 3/4 and then at the May high of US$8.44. First support lies at US$8.00 and then at Friday's low of US$7.83 1/4.