June 22, 2007

 

US Wheat Outlook on Friday: Down 5-7 cents on harvest progress, overnight

 

 

Harvest progress and follow-through selling from the overnight are expected to keep U.S. wheat futures on the defensive at the start of Friday's day session, traders said.

 

Wheat futures are called to open 5 to 7 cents lower per bushel. In e-cbot overnight electronic trading, Chicago Board of Trade July wheat slipped 7 1/4 cents to US$5.98 3/4.

 

Market participants remain focused on the winter wheat harvest, with particular interest on yields in Kansas, the nation's top-producing wheat state, traders said. Rains have delayed producers from cutting hard red winter wheat recently, adding some premium to the markets.

 

Hotter temperatures and little rainfall in the U.S. Southern Plains, however, will favor the harvest in western growing areas, DTN Meteorlogix said. Eastern growing areas during the next seven days will not be as wet as they have been, but some harvest disruptions from rainfall cannot be ruled out, the weather firm said.

 

Reports of poor yields coming from Southern Plains wheat fields this week have provided "bullish fuel" for futures prices, a market technician said. Some traders said they expected results to improve as combines begin to cut better-looking wheat.

 

Trading is expected to be volatile Friday amid uncertainty about the quality of the winter wheat crop and as prices remain at elevated levels, traders said.

 

There could be some spillover pressure on wheat from weakness in CBOT corn and soybeans overnight, a floor trader added. The neighboring markets stumbled overnight on near-term weather forecasts showing beneficial rains moving through the Midwest, traders said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at US$6.50, the market technician analyst said. The next downside objective for the bears is closing prices below psychological support at US$6.00 a bushel.

 

First resistance is seen at Thursday's contract high of US$6.34 and then at US$6.40. First support lies at US$6.20 and then at Thursday's low of US$6.15.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above solid resistance at the contract high of US$6.31, the technician said. The bears' next downside objective is closing prices below solid support at US$5.90.

 

First resistance is seen at Thursday's high of US$6.19 1/2 and then at this week's high of US$6.22. First support is seen at US$6.00 and then at US$5.95.

 

Minneapolis Grain Exchange wheat futures climbed Thursday on an active July/September spread trade and as the U.S. Department of Agriculture announced sales of 160,000 metric tonnes of hard red spring wheat to unknown destinations for the 2007-08 marketing year, traders said. The market continues to ignore high U.S. spring wheat condition ratings, which should be bearish, an analyst said.

 

The U.S. Northern Plains are expected to see warm-to-hot temperatures and less rainfall during the next seven days, Meteorlogix said. That will favor developing spring grains as recent wet conditions have increased diseases, the weather firm said.

 

In Australia, the Meteorlogix forecast predicts a chance of some beneficial shower activity developing in the dry areas of West Australia during the next few days.

 

A few significant thundershowers have been in Black Sea region, although coverage is not high, Meteorlogix said. A more widespread rain is needed in Ukraine and southern Russia, where there is a drought. The outlook for the east Ukraine and North Caucasus Russia calls for near to below normal rainfall during the next seven days, the weather firm said.

 

In other news, Japan said it was seeking 127,000 metric tonnes of wheat in a tender to be concluded Wednesday. China's May wheat imports, meanwhile, fell 96% on the year to 2,524 metric tonnes, the government said.