June 10, 2009

 

US Wheat Outlook on Wednesday: Seen up slightly, with neighboring markets

 

 

U.S. wheat futures are expected to start a few pennies higher and in line with overnight gains Wednesday as the markets digest neutral-to-slightly bearish government crop data, traders and analysts said.

 

Chicago Board of Trade July wheat is called to start up 2 cents to 3 cents per bushel. In overnight electronic trading, Chicago Board of Trade July wheat edged up 3 cents to US$6.16 3/4.

 

It looks somewhat bearish that the U.S. Department of Agriculture increased its estimates for 2009-10 world and U.S. ending stocks, analysts said. It was a little surprising to see global stocks expand amid worries about dryness in Argentina and other growing areas, said Dan Manternach, ag services director at Doane Advisory Services.

 

"On wheat, we think the report was a little unfriendly," he said.

 

But a CBOT floor trader said the data came in largely as expected and did not change the market's perception about wheat. The markets should start a bit firmer, along with CBOT corn and soybeans, he said.

 

The crop data should "set the early tone [and] then attention will be placed on what direction the dollar is trading," Country Hedging said in a note. Weakness in the dollar is seen as supportive for wheat and helped the markets jump Tuesday.

 

Bulls and bears are "on a level near-term technical playing field" after Tuesday's bounce, a technical analyst said. The next downside price objective for the bears is pushing and closing CBOT July wheat below solid technical support at US$5.95 3/4, he said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.50, he said.

 

First resistance is seen at US$6.17 1/2 and then at US$6.25. First support lies at US$6.00 and then at US$5.95 3/4.

 

Episodes of scattered thunderstorms through north and central areas of the U.S. central and southern Plains is "unfavorable for maturing wheat and could impact the harvest...if it continues to be active," private weather firm DTN Meteorlogix said in a forecast. The U.S. winter wheat harvest was 5% complete as of Sunday, down from the average of 10%, according to USDA.

 

Spring wheat areas of the northern Plains are expected to be "very cool and damp-to-wet for a few more days," which will keep development slow, Meteorlogix said. The pattern looks warmer during the last part of the five-day period and during the six-to-10 day period, which favors wheat.

 

In other news, Egypt will continue buying Russian grain despite a recent contamination scare, RIA Novosti reported Wednesday, citing Egypt's ambassador to Moscow. Russia wants to begin exporting wheat to Japan via shipping terminals slated for construction through alliances with Japanese trading companies, according to a report in the Nikkei. Russia was a major wheat exporter in 2008-09 but struggled with quality concerns.