June 12, 2007

 

US Wheat Outlook on Tuesday: 1-3 cents up on tech momentum, harvest delays

 

 

Technical momentum and continued concerns about harvest delays are expected to lend strength to U.S. wheat futures Tuesday, analysts said.

 

Benchmark Chicago Board of Trade July wheat is called to open 1 to 3 cents up per bushel. In e-cbot trading, CBOT July wheat gained 2 3/4 cents to US$5.58 3/4.

 

Nearby CBOT wheat has solid upside technical momentum after trading to 11-year highs Monday on a bullish U.S. Department of Agriculture supply/demand report and speculative buying, analysts and traders said. Government estimates for lower-than-expected U.S. winter wheat production and concerns about tight global stocks remain supportive, they added.

 

The USDA's weekly crop progress report also should give prices a boost as it reflected some problems with winter and spring wheat, an analyst said. Winter wheat harvest is behind schedule at 5% completed as of Sunday, versus 17% a year ago and 10% on average, according to the USDA.

 

DTN Meteorlogix said widespread rain and thunderstorms in the U.S. Southern Plains during the next few days may continue to disrupt the harvest and will be unfavorable to the maturing crop. Any harvest delays should keep providing support to the futures markets, an analyst said.

 

The USDA also reported spring wheat in 81% good-to-excellent condition, a four percentage-point drop from the previous week. Excessive rains in the U.S. Northern Plains have hurt the crop a bit, but the condition ratings are still up 14 percentage points from last year's crop, an analyst noted.

 

Meteorlogix said heavy storms over the Dakotas and Minnesota during the next few days may lead to more local flooding in wheat fields.

 

CBOT corn and soybeans stumbled overnight, though, and could weigh on wheat prices, a CBOT floor trader said. Wheat also could see a bit of a pullback after the strong rally Monday, he said.

 

The bulls' next upside price objective is to close CBOT July wheat above major psychological resistance at US$6.00, a technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$5.30 1/2, which would fill on the downside Monday's big upside price gap on the daily bar chart, he added.

 

First resistance is seen at Monday's contract high of US$5.57 1/2 and then at US$5.60. First support lies at US$5.50 and then at US$5.45.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing July wheat above solid longer-term chart resistance at the 2006 high of US$5.56, the technical analyst said. Above that, US$6.00 is the next upside price objective. The bears' next downside objective is closing prices below solid support at US$5.20, which is the bottom of Monday's big upside price gap on the daily chart, he said.

 

First resistance is seen at US$5.56 and then at US$5.60. First support is seen at US$5.40 and then at US$5.30.

 

Looking at global weather conditions, hot temperatures and mostly dry weather will deplete soil moisture and increase stress to crops on the North China Plain, Meteorlogix said.

 

China has harvested 18 million hectares of wheat as of Sunday, accounting for more than 80% of the total area planted with wheat, the Farmers' Daily reported Tuesday, citing the Ministry of Agriculture. Of that amount, Shangdong province, a major wheat producing region, has harvested 74% of the wheat it planted, or 2.89 million hectares, it said. Henan, Anhui and Jiangsu provinces have almost completed their wheat harvests, the paper said.

 

In the Black Sea region, which is suffering from a drought, scattered light showers mainly occurred yesterday in the west and north-central Ukraine and Belarus. Any shower activity during the next seven days is expected to be light and with low coverage, the weather firm said.

 

In Argentina, dryness is impacting emergence and early growth of wheat through southern locations, Meteorlogix said. There will be some chance for light to moderate rain during the next few days, however this is most likely in central and east areas, the firm said.

 

In other news, Japan said it is seeking 110,000 metric tonnes of wheat in a routine tender to be concluded Thursday for delivery in August.