June 19, 2008

 

US Wheat Outlook on Thursday: 5-7 cents down on profit-taking, corn setback

 

 

U.S. wheat futures are expected to start Thursday's day session on the defensive as the markets set back from recent gains along with corn.

 

Benchmark Chicago Board of Trade July wheat is called to open 5 to 7 cents per bushel lower. In overnight electronic trading, CBOT July wheat slid 6 3/4 cents to US$8.97 1/4.

 

CBOT corn, which has been providing direction to wheat recently, stumbled overnight. Profit-taking and strength in the U.S. dollar are seen weighing on the grains.

 

Wheat has room to pull back after rising recently in the face of the advancing U.S. winter wheat harvest and expectations for a big global crop, an analyst said. As of Wednesday's close, CBOT July wheat had climbed nearly US$1.50 since the beginning of the month.

 

"Wheat's been a tiger," the analyst said.

 

It doesn't help bulls that Egypt canceled its snap tender to buy at least 55,000 to 60,000 metric tonnes of wheat due to high prices, a CBOT floor analyst said. However, weekly U.S. wheat export sales were strong, he said.

 

Export sales for the week ended June 12 were 538,100 tonnes, up 69% from the previous week and above trade estimates of 200,000 to 350,000 tonnes. In other export news, Japan said it bought 227,000 tonnes of wheat, including 160,000 tonnes from the U.S., in a routine tender concluded Thursday.

 

Chart strength has helped wheat rise lately, and bulls still have upside technical momentum after recent gains, 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, he said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.50.

 

First resistance is seen at US$9.13 3/4 and then at US$9.25. First support lies at Wednesday's low of US$8.85 and then at this week's low of US$8.69.

 

There continue to be some bullish concerns about wet weather at harvest time in hard red winter wheat regions of the U.S. southern Plains. Warmer temperatures in the northern Plains, meanwhile, should help improve conditions for spring wheat, DTN Meteorlogix said.

 

Argentina is expected to see scattered light showers with locally heavier totals before turning drier. Rainfall is needed to help replenish soil moisture and allow for more widespread planting of the wheat crop, Meteorlogix said.

 

In Australia, where dryness is also a concern, scattered showers fell through southern New South Wales during the past 24 hours. A few more showers are possible in the region Thursday before an "extended period" of dryness and fairly cool weather moves in, Meteorlogix said.

 

Australia's most active ASX wheat futures contract fell Thursday as growers sold to gain from strong recent prices and as the outlook for the crop improved, an analyst said. The rainfall in New South Wales, which accounts for 30% of national wheat production in a normal year, boosted expectations of a higher output and likely weighed on prices, he said.