June 25, 2009

 

US Wheat Outlook on Thursday: 3-5 cents lower on harvest; waiting for Egypt

 

 

Harvest pressure is expected to weigh on U.S. wheat futures early Thursday as traders wait for the results of an Egyptian tender.

 

Chicago Board of Trade September wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT September wheat lost 4 3/4 cents to US$5.63, and CBOT December wheat slipped 2 1/4 cents to US$5.90.

 

The U.S. winter wheat harvest has been active this week and should remain active through the weekend thanks to warm, dry weather, an analyst said. Cutting is picking up speed across Kansas, the country's top wheat-growing state, according to growers group Kansas Wheat.

 

"Hot temperatures and wind are helping wheat fields dry down, allowing farmers throughout the state to cut their wheat," the group said.

 

Kansas may produce a bigger crop this year than the U.S. Department of Agriculture expects as harvest is off to a good start, said Larry Glenn, broker and analyst at Frontier Ag. There are reports of some "low" yields in southwestern areas of the state, but there are "awful good reports" on yields in north-central Kansas, he said. The USDA this month estimated Kansas would produce 340 million bushels of wheat.

 

Wheat is due for a bounce after recent losses, but it is difficult to recover when new supplies are coming online, analysts said. Prices are in a "steep" downtrend on the daily bar chart, a technical analyst said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$5.75, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.30, he said.

 

First resistance is seen at US$6.00 and then at US$6.06 1/4. First support lies US$5.90 and then at US$5.80, he said.

 

"The charts are oversold, but we just have a lot of wheat coming to town," Glenn said.

 

Traders are waiting to see the results of a tender for 55,000 tonnes to 60,000 tonnes of wheat from Egypt's state-owned General Authority for Supply Commodities. GASC, a major buyer on the world wheat market, issued a tender last week and then canceled it. The U.S. isn't expected to win any of the business in the latest tender because prices are higher than for French or Black Sea wheat, Glenn said.

 

Export demand for U.S. wheat in general has been sluggish lately, although there are ideas that recent setbacks could attract some business, an analyst said. Weekly U.S. wheat export sales for the week ended June 18 were 368,300 tonnes, within trade expectations of 200,000 tonnes to 400,000 tonnes.

 

In other news, India's farm secretary said the government will monitor the progress of annual monsoon rains before making a decision on easing export bans on wheat and non-basmati rice. India banned wheat exports in 2007 to curb inflation and ensure adequate local supplies but stocks have increased to a comfortable level since then.