June 11, 2009

 

US Wheat Outlook on Thursday: Seen up but lacking fundamental support

 

 

U.S. wheat futures are poised to start firmer Thursday on supportive signals from outside markets and in a recovery from Wednesday's losses.

 

Chicago Board of Trade July wheat is called to open 3 to 7 cents higher per bushel. In overnight electronic trading, CBOT July wheat rose 5 3/4 cents to US$6.01 3/4.

 

Gains in crude oil and weakness in the U.S. dollar should offer modest support for the wheat, said Jerry Gidel, analyst for North America Risk Management Services. Expected strength in neighboring CBOT corn and soy could lend additional support, a trader said.

 

The wheat markets may go into a consolidation mode for the remainder of the week after CBOT July wheat Wednesday hit a fresh low for the week and closed below US$6, Gidel said. Wheat is due for a bit of a recovery after the slide, a trader said.

 

The markets lack a strong fundamental story and will continue to be influenced by outside markets and money flows, an analyst said. Sluggish demand for U.S. wheat and ideas that world supplies are comfortable "don't help" support prices, he said.

 

Weekly U.S. wheat export sales totaled 326,500 tonnes, which was above trade estimates of 200,000 tonnes to 300,000 tonnes. Still, demand is nothing to get excited about, traders said.

 

The U.S. Department of Agriculture on Wednesday confirmed that "we've got plenty" of wheat around in the world, by increasing its estimates for new-crop wheat carryout, Gidel said. The agency also nipped new-crop production estimates a bit.

 

There continue to be worries that head scab, a fungal disease, may lower quality and yields in the U.S. soft red winter wheat crop. Wet weather has encouraged fungal diseases this season.

 

"I think there's going to be more issues out there with disease," Gidel said.

 

Episodes of scattered thunderstorms through north and central hard red winter wheat areas will favor filling crops but are "unfavorable" for maturing wheat, private weather firm DTN Meteorlogix said. The rain could slow the harvest if it continues, the firm said.

 

Warmer temperatures in the northern U.S. Plains during the weekend and early next week will favor spring wheat after recent cool conditions, Meteorlogix said. However, it may turn wetter and cooler again later in the 10-day period, the firm said.

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below solid technical support at US$5.63 1/4, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.35, he said.

 

First resistance is seen at US$6.00 and then at US$6.17 1/4. First support lies at US$5.92 and then at US$5.80.