June 19, 2007

 

US Wheat Outlook on Tuesday: 8-10 cents down Oon e-CBOT, harvest, spillover

 

 

U.S. wheat futures are expected to start Tuesday's day session on the defensive amid pressure from overnight losses, the advancing winter wheat harvest and declines in neighboring markets, floor traders say.

 

Benchmark Chicago Board of Trade July wheat is called to open down 8 to 10 cents per bushel. In e-cbot overnight trading, CBOT July wheat ended 10 cents lower at US$5.91.

 

Harvest is underway in the U.S. Southern Plains, and that's a bearish seasonal factor for wheat, a technical analyst said. Cutting progress, however, is considerably below average due to delays from heavy rains, traders noted.

 

The U.S. Department of Agriculture said in its weekly crop progress report that 11% of the crop was harvested as of June 17, compared to 34% last year and a five-year average of 20%. Kansas, the nation's top wheat-producing state, had harvested 2% of its crop, up from 1% last week and the five-year average of 19%.

 

Oklahoma had harvested 41% of its wheat, up from 25% last week but below the five-year average of 66%. Texas had harvested 31%, up from 17% last week but below the five-year average of 57%, according to the USDA.

 

The slower-than-normal harvest pace could be fundamentally supportive to the wheat market, especially if early yield results in Kansas are disappointing, an analyst said. Hotter temperatures and less thundershower activity in the Southern Plains during the next five days should help improve the condition of maturing wheat, according to DTN Meteorlogix.

 

Developing U.S. spring wheat, meanwhile, is in better condition than a week ago, the USDA said in the progress report. The agency rated 85% of the crop in good-to-excellent condition, up from 81% the previous week.

 

A favorable weather pattern is on tap for spring wheat in the U.S. Northern Plains, Meteorlogix said. There is enough warm weather and sunny spells between shower threats to favor the crop, the weather firm said.

 

Wheat prices also will be keeping an eye on activity in CBOT corn and soybeans, an analyst said. The neighboring markets were down overnight.

 

The bulls' next upside price objective is to close CBOT July wheat above resistance at the contract high of US$6.18 1/2, the technical analyst said. The next downside price objective for the bears is closing prices below solid support at US$5.60.

 

First resistance is seen at Monday's high of US$6.07 and then at US$6.12 1/2. First support lies at Monday's low of US$5.96 and then at US$5.90.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing July wheat above solid resistance at the contract high of US$6.15. Above that, US$6.25 is the next upside price objective. The bears' next downside objective is closing prices below solid support at US$5.60.

 

First resistance is seen at Monday's high of US$5.98 and then at US$6.00. First support is seen at Monday's low of US$5.89 and then at US$5.80.

 

Looking at international growing areas, there will be some scattered shower activity in the very dry West Australia wheat belt during the next five to seven days but not enough to end a drought, Meteorlogix said. The Australian Bureau of Agricultural & Resource Economics, or Abare, pegged the country's new wheat crop at 22.5 million tonnes, down from its March estimate of 25 million but in line with the USDA's June estimate of 22.1 million.

 

There will be thundershowers in Black Sea region during the next 24 to 48 hours, especially likely in North Caucasus Russia, according to Meteorlogix. Rain is needed to ease dryness concerns in Ukraine and southern Russia after two months of below-normal rainfall and above-normal temperatures.

 

Grain stocks in Ukraine on June 1 totaled 4.4 million metric tonnes, about the same as on the same date last year, an official said. Stocks included 2.5 million tonnes of wheat, of which 2 million tonnes was milling wheat, he said.

 

In other news, Japan is seeking 93,500 metric tonnes of wheat in a tender to be concluded Thursday, an agriculture ministry official said Tuesday. The U.S. and Australian wheat is scheduled to arrive between July 26 and Aug. 26, while Canadian wheat is expected to arrive between Aug. 1 and Aug. 31.