June 12, 2008

 

US Wheat Outlook on Thursday: 12-15 cents lower on profit-taking setback

 

 

Profit-taking is expected to drag U.S. wheat futures into negative territory at the start of Thursday's day session after a limit-up rally Wednesday.

 

Benchmark Chicago Board of Trade July wheat is called to open 12 to 15 cents per bushel lower. In overnight electronic trading, CBOT July wheat dropped 15 cents to US$8.54.

 

Nearby July wheat Wednesday climbed its 60-cent daily limit at the CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange on spillover support from limit-up corn. Corn was only slightly higher overnight, allowing wheat to retreat, traders said.

 

The daily limit for wheat is expanded to 90 cents Thursday following the limit-up closes.

 

The wheat markets should continue to come under technical pressure during the day session after stumbling overnight, unless corn surges again, an analyst said. Weakness in crude oil is seen as a bearish influence for the grains, he said.

 

Corn has surged to record highs this week on concerns that flooding in the U.S. Midwest is lowering yields and wiping out planted acres. The eastern Midwest could turn drier and cooler during the six-to-10-day period, although western areas could stay wet as warm air in the Plains clashes with cool air in the eastern Midwest, said DTN Meteorlogix.

 

Concerns about excessive wetness are also seen as bullish for soybeans, as soy is planted in many of the same areas as corn. The fundamental outlook for wheat, meanwhile, is bearish amid expectations for a strong winter wheat crop.

 

"The wheat market does not have the bullish fundamentals like corn and soybeans do, and will have to depend on the upside markets for upside support in the near term," an analyst said.

 

Early harvest results from the U.S. southern Plains indicate yields and test weights are strong, according to crop dispatches. The central and southern Plains could see thundershowers during the next six to 10 days, which is seen as unfavorable to the advancing harvest.

 

There are concerns about "severe" dryness in wheat-growing regions of Argentina, like Buenos Aires, a trader said. Most major wheat areas are expected to stay mostly dry or see only periodic light showers during the next 10 days, Meteorlogix said.

 

The Argentine government has authorized the export of 1 million metric tonnes of wheat that has been registered with the state. Half will go to Brazil, with the rest headed going to Bolivia and "other markets that Argentina traditionally supplies with wheat," an official said.

 

Total weekly U.S. wheat export sales were 322,800 tonnes, which was slightly above trade expectations of 100,000 to 250,000 tonnes. The export sales report is seen as neutral for wheat, a trader said.

 

The bulls' next upside price objective is to push and close CBOT July wheat above solid technical resistance at US$9.00, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.00, he said.

 

First resistance is seen at US$8.85 and then at US$9.00. First support lies at US$8.50 and then at US$8.38.