June 19, 2009

 

US Wheat Outlook on Friday: Seen higher, but harvest pressure looms

 

 

U.S. wheat futures are expected to start firmer Friday in a turnaround from recent losses but could struggle to hold on to gains ahead of a harvest weekend, analysts said.

 

Chicago Board of Trade September wheat is called to open 2 to 5 cents per bushel higher. In overnight electronic trading, CBOT September wheat gained 3 1/2 cents to US$5.92 3/4, while CBOT December wheat rose 4 cents to US$6.19 3/4.

 

Wheat is technically oversold and due for a recovery after dropping more than US$1.10 since hitting eight-month highs June 1, traders said.

 

However, it will be difficult to find bounces during the harvest, said Tom Leffler, owner of Leffler Commodities. It would be "pretty unusual to see a higher close going into a weekend where you've got harvest going on," he said.

 

The pace of harvest in the southern U.S. Plains is "starting to pick up pretty fast," Leffler said. Warmer weather is expected to be mostly favorable for cutting through next week, although there is the potential for rain in some areas, according to forecasts.

 

There appears to be a higher risk for thunderstorms in western wheat areas of the central and southern Plains during the next day or two than was thought Thursday, private weather firm DTN Meteorlogix said. That could be "unfavorable" for maturing wheat and the wheat harvest, although conditions turn drier and hotter again later in the weekend, the firm said.

 

Along with pressure from the U.S. harvest, forecasts for growing world wheat supplies are fundamentally bearish, an analyst said. CBOT September wheat has lost more than 50 cents since the U.S. Department of Agriculture on June 10 raised its estimates for new-crop ending stocks.

 

Production from Australia's 2009 wheat crop likely will reach 22.6 million metric tonnes, a 5.6% increase on the year, according to a monthly agribusiness review issued by National Australia Bank Ltd. (NAB.AU). The bank's estimate has increased 400,000 tonnes from a month ago, an official said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$6.00, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.50, he said.

 

First resistance is seen at US$6.25 3/4 and then at US$6.40. First support lies at this week's low of US$6.10 3/4 and then at US$6.00.

 

"Prices are in a steep two-week-old downtrend on the daily bar chart," the technical analyst said. "Wheat bears have the near-term technical advantage."

 

There could be some position-evening after the sell-off and ahead of the weekend, an analyst said. Traders in the grain and soybean markets are waiting for private analytical firm Informa Economics to issue acreage estimates around 11:30 a.m. EDT.