June 20, 2008

 

US Wheat Outlook on Friday: Seen slightly weaker on overnight, corn

 

 

U.S. wheat futures are poised to start Friday's day session slightly lower on follow-through pressure from the overnight session, with the markets still keeping an eye on activity in Chicago Board of Trade corn.

 

In overnight electronic activity, CBOT July wheat slipped 1/2 cent to US$8.80 1/2 per bushel. CBOT December wheat shed 1 cent to US$9.21.

 

Wheat continues to look for leadership from corn, as it has in recent weeks. The grains are linked because both are used for animal feed.

 

Corn may find some direction from acreage estimates expected out Friday from private analytical firm Informa Economics, traders said. However, the estimates shouldn't carry much weight as the impact of Midwest flooding is still unknown, they said.

 

There was little fresh fundamental news out overnight for wheat, and activity during the day session is expected to be relatively quiet ahead of the weekend, a CBOT trader said. July options are expiring Friday.

 

Bulls still have the slight near-term technical advantage in wheat and do not want to see a bearish weekly low close on Friday, a technical analyst said. The bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at this week's high of US$9.54, he said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$9.00, he said.

 

First resistance is seen at US$9.38 and then at US$9.54. First support lies at Thursday's low of US$9.16 1/4 and then at US$9.00.

 

Concerns about damage to U.S. winter wheat from excessive rains continue to provide underlying support, an analyst said. Wet weather is disrupting the harvest in the central and southern Plains, while threatening crop quality, DTN Meteorlogix said.

 

In the northern Plains, warmer temperatures and limited shower activity are on tap for the next five days. The conditions should favor the developing spring wheat crop, Meteorlogix said.

 

Rains of 1/4 to 1 inch in Argentina during the past 24 hours will improve soil moisture conditions for wheat planting, emergence and development, Meteorlogix said. Argentina's 2008-09 wheat planting area is projected to fall 16% from last season due to dry weather, high input costs, and other factors, according to the country's Agriculture Secretariat.

 

Argentina is a major exporter on the world market and the trade will keep an eye on its crop during the next few months, a CBOT floor trader said. The market also continues to watch conditions in Australia, which has seen improved moisture after dryness.

 

In Australia, scattered showers hit Victoria and southern New South Wales during the past 24 hours and more are possible in the next few days. Otherwise cool and dry weather is expected.

 

"More rain is still needed to end dryness/drought concerns through Australia's central and east wheat belt, Meteorlogix said. But conditions have generally improved following recent moisture, the private weather firm said.