June 18, 2007

 

US Wheat Outlook on Monday: 2-3 cents lower on harvest, consolidation

 

 

U.S. wheat futures are expected to start Monday's day session lower amid expectations for harvest progress in the Southern Plains and consolidation after strong gains last week, traders said.

 

Benchmark Chicago Board of Trade July wheat is called to open 2 to 3 cents lower per bushel. In e-cbot overnight trading, CBOT July wheat fell 3 1/4 cents to US$6.03 1/4.

 

Less thundershower activity and hotter temperatures in the U.S. Southern Plains during the next week or so should help improve the condition of maturing wheat, DTN Meteorlogix said in a forecast. Harvest delays are still expected on Monday afternoon's weekly crop progress report after heavy rains last week, but the condition for harvest may improve later this week, the weather firm said.

 

Going forward, harvest reports from the field should give the markets further direction, an analyst said. Yields have been seen as disappointing so far in Oklahoma, and poor results in Kansas would boost prices, he added.

 

Wheat futures last week rallied to 11-year highs for front-month contracts on fears about shrinking supplies. Those concerns remain supportive, although CBOT July wheat is in an overbought condition and due for a corrective setback, a floor trader said. Wheat bulls, however, still have solid upside momentum, a technical analyst said.

 

The bulls' next upside price objective is to close CBOT July wheat above resistance at US$6.50, the technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$5.50.

 

First resistance is seen at Friday's high of US$6.12 1/2 and then at the contract high of US$6.18 1/2. First support lies at US$6.00 and then at US$5.90.

 

Non-commercial speculative funds increased long CBOT wheat futures and options positions by 5,896 lots and cut shorts by 4,026 lots as of June 12, the Commodity Futures Trading Commission reported in a supplemental report. The funds were net long 13,123 contracts, the CFTC said.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing July wheat above solid resistance at US$6.25, the analyst said. Above that, US$6.50 is the next upside price objective. The bears' next downside objective is closing prices below solid support at US$5.60 a bushel.

 

First resistance is seen at Friday's high of US$6.05 and then at the contract high of US$6.15. First support is seen at Friday's low of US$5.94 and then at US$5.90.

 

Non-commercial speculative funds increased long KCBT wheat futures and options positions by 5,609 lots, trimmed shorts by 5,219 lots and were net long 21,414 contracts, the CFTC said in another supplemental report.

 

In other news, wheat prices in China were lower in the week to Monday, dragged down by the sales of new harvests. With 90% of the wheat crop harvested as of last Thursday, the country is on track to complete the harvest by end June.

 

Increasing shower activity through the southern part of central China's crop belt early this week may reach into central locations later, Meteorlogix said. Rainfall will help build soil moisture and irrigation supplies for crops.

 

Argentina's 2007-08 wheat planting, meanwhile, slowed last week due to dry soil conditions and diesel shortages that impeded the use of farm machinery, the Buenos Aires Cereals Exchange said in its weekly crop report. As of Friday, growers had planted 28.2% of the 5.4 million hectares forecast for wheat in the 2007-08 season, according to the exchange.

 

High wheat prices are pushing many farmers to consider planting wheat, but the dry weather may prevent it, the exchange said. The dry pattern looks to continue, Meteorlogix said.

 

Elsewhere, the next chance for scattered shower activity in the very dry West Australia wheat belt comes this Saturday and Sunday, according to Meteorlogix. Early indications suggest only a light event, not enough to significantly improve dryness, the weather firm said.

 

Temperatures were back in the low to middle 90s Fahrenheit Sunday in eastern Ukraine southern Russia, which are suffering from a severe drought. There is a weak trough in the area that may cause a few thundershowers early this week, Meteorlogix said. Temperatures should turn cooler, but the overall dry weather pattern will likely continue, the firm said.