June 18, 2008

 

US Wheat Outlook on Wednesday: 3-5 cents firmer on corn, wet harvest weather

 

 

Spillover support and concerns about wet weather in the U.S. Plains are expected to tug U.S. wheat futures higher at the start of Wednesday's day session.

 

Benchmark Chicago Board of Trade July wheat is called to open 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT July wheat jumped 2 3/4 cents to US$9.01.

 

Strength in CBOT corn should continue to lend support to wheat, traders said, as both the grains are used for animal feed. Corn has been soaring lately on worries about crop damage from Midwest floods.

 

Wheat also has shown technical strength and "resilience" to independently hold on to gains after recent advances, a CBOT floor broker said. CBOT July wheat Tuesday closed near the session high and closed at a fresh two-month high close.

 

"Bulls still have upside technical momentum and gained more Tuesday," a technical analyst said.

 

The bulls' next upside price objective is to push and close CBOT July wheat above solid technical resistance at this week's high of US$9.13 3/4, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.50, he said.

 

First resistance is seen at US$9.13 3/4 and then at US$9.25. First support lies at Tuesday's low of US$8.69 and then at US$8.50.

 

There are bullish worries that widespread thunderstorms could disrupt hard red winter wheat cutting in the central and southern Plains. Storms in the region this week "will be mostly unfavorable for maturing wheat and could cause some delay to the harvest," DTN Meteorlogix said.

 

Fears about production losses due to dryness in the Southern Hemisphere remain in the back of traders' minds, an analyst said. There is a chance for scattered light showers in Australia, with locally heavier totals possible through eastern wheat areas Wednesday into Thursday, according to Meteorlogix.

 

Scattered light showers, with locally heavier totals, are forecast in Argentina for Wednesday night or Thursday. Rainfall is needed to help replenish soil moisture and allow for more widespread planting of the wheat crop, Meteorlogix said.

 

"Much of the current strength is technical in nature, with prices rapidly approaching initial price objectives," Farm Futures analyst Arlan Suderman said in a market comment. "However, market bulls can find some fundamental justification for the rally in fears that dry weather in Argentina and Australia will leave both of those countries short once again."

 

But wheat could trade both sides Wednesday after a firmer start, a CBOT floor trader said. It seems as though "the market may want to catch its breath," he said.