June 16, 2009

 

US Wheat Outlook on Tuesday: Seen up on falling dollar, turnaround

 

 

Supportive outside markets should lift U.S. wheat futures at the start of Tuesday's day session following a sell-off Monday, traders said.

 

Chicago Board of Trade September wheat is called to open 4 cents to 7 cents per bushel higher. In overnight electronic trading, CBOT September wheat gained 5 3/4 cents to US$6.09 1/4.

 

A drop in the dollar should support wheat after strength in the dollar pressured grains Monday, a CBOT floor trader said. Expected gains in crude oil and equities are adding to the bullish tone. Activity in outside markets, particularly the dollar, is the biggest change from Monday, with the world supply and demand situation looking mostly unchanged, the trader said.

 

The bottom line for the world supply situation is "there's plenty of wheat around," a CBOT trader said. The U.S. Department of Agriculture confirmed that last week by raising its forecast for new-crop world ending stocks, he said.

 

The Australian Bureau of Agricultural and Resource Economics, or Abare, pegged Australia's 2009-10 wheat crop at 22 million tonnes, down slightly from a March forecast of 22.1 million tonnes. That indicates Australia should export about 15 million tonnes, a CBOT trader said.

 

In the U.S, the winter wheat harvest is behind schedule, with 9% cut as of Sunday, compared to 16% a year earlier and to the five-year average of 19%, according to the USDA. Illinois and Missouri are among the states behind schedule due to a soggy spring, analysts said.

 

Thunderstorms with some severe weather are unfavorable for maturing crops and the hard red winter wheat harvest in the central and southern Plains, DTN Meteorlogix said. Hot, dry weather expected during the six-to-10-day period will be favorable, the private weather firm said.

 

The USDA said that 44% of winter wheat was rated good-to-excellent, unchanged from the previous week. It said 75% of spring wheat was rated good-to-excellent, up from 72% last week and 67% at the same time last year.

 

Condition ratings jumped in the Dakotas, with North Dakota's good-to-excellent rating climbing to 83% from 78% the prior week and South Dakota's rating climbing to 62% from 56%. Still, there are worries about reduced acreage and yield threats due to late planting, traders said.

 

Warmer temperatures will favor spring wheat in the northern Plains after recent cool to cold conditions, according to Meteorlogix. Scattered thundershowers also mostly favor the developing crop, the firm said.

 

In other news, Japan said it was seeking 127,000 tonnes of wheat, including 86,000 tonnes, in a routine tender to be concluded Thursday. The shipment is expected to arrive Aug. 11 to Sept. 10.

 

Bears have gained the near-term technical advantage in wheat following recent sell-offs, a technical analyst said. CBOT July wheat is down roughly US$1 since hitting an eight-month high June 1.

 

The next downside price objective for bears is pushing and closing CBOT July wheat below solid technical support at US$5.50, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.20, he said.

 

First resistance is seen at US$5.84 1/2 and then at US$6.00. First support lies at US$5.68 and then at US$5.63 1/4.