June 22, 2009

 

US Wheat Outlook on Monday: Seen Down on harvest pressure, spillover

 

 

Expectations for harvest progress and pressure from other markets are expected to drag down U.S wheat futures at the start of Monday's day session.

 

Chicago Board of Trade September wheat is called to start 5 to 9 cents per bushel lower. In overnight trading, CBOT September wheat dropped 10 1/4 cents to US$5.74 1/4.

 

Wheat has a seasonal tendency to slump this time of year as the U.S. winter wheat harvest advances, analysts said. Wet weather paused cutting this weekend in Kansas, the country's top wheat-growing state, but drier weather in the coming days should allow combines to roll again, they said.

 

Harvest began Friday at Ada Grain Co. in Minneapolis, Kan., with 40,000 bushels of wheat hauled in, according to a report from growers' group Kansas Wheat. Rain Saturday stopped any harvest progress for the weekend, it said.

 

"The weather during this week is more favorable for mature wheat and wheat harvests," private weather firm DTN Meteorlogix said.

 

In the northern U.S. Plains, meanwhile, spring wheat mostly benefits from warmer temperatures and continued scattered shower activity during the 10-day period, Meteorlogix said. A lack of rain remains a concern from Argentina's wheat, with the driest areas of La Pampa and southwest Buenos Aires expected to stay mainly dry during this week, the firm said.

 

Overnight losses in CBOT corn and soybeans are a bearish influence on wheat, said Joe Victor, vice president of marketing for Allendale. Weakness in crude oil and strength in the U.S. dollar add pressure to the grains and soy, he said.

 

"As corn goes, so goes the wheat," Victor said.

 

In other news, China said it will scrap export taxes on some grains, including wheat, rice and soybeans, effective July 1. The move could be seen as psychologically bearish for U.S. prices, although China will not be a serious threat in the world wheat export market, an analyst said.

 

The market's technical outlook looks weak after CBOT December wheat on Friday hit a fresh six-week low and closed at a bearish weekly low close, a technical analyst said. Recent losses have inflicted "serious near-term technical damage,' he said.

 

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

 

First resistance is seen at Friday's high of US$6.23 and then at last week's high of US$6.40. First support lies at Friday's low of US$6.07 1/2 and then at US$6.00.