June 26, 2007

 

US Wheat Outlook on Tuesday: 2-4 cents up; stats can, India seen supportive

 

 

U.S. wheat futures are expected to start Tuesday's day session 2 to 4 cents higher per bushel with support from an Indian wheat tender and a decline in Canadian wheat seedings, traders said.

 

In e-cbot trading, Chicago Board of Trade July wheat rose 2 1/4 cents to US$5.91 3/4.

 

India will issue a tender to import 1 million metric tonnes of wheat Tuesday night or Wednesday, a senior government official said. The last date for submitting bids is July 4, he said.

 

It doesn't appear the U.S. and India have worked out a deal for India to import U.S. wheat yet, but the tender is still supportive because it takes supplies off the world market at a time when stocks are already tight, a CBOT floor broker said. The U.S. Department of Agriculture has pegged 2007-08 global ending stocks at a 30-year low.

 

Statistics Canada, meanwhile, estimated Canada's 2007 all wheat seedings at 21.701 million acres, down from its April estimate of 23.759 million and from 2006 seedings of 24.249 million. The decrease is "very bullish," a CBOT floor trader said.

 

The Statistics Canada estimate was below analysts' pre-report estimates of 22.700 million to 25.600 million.

 

In the U.S., winter wheat harvest continues to lag. The USDA reported Monday afternoon that harvesting was 22% complete as of June 24, down from 50% last year and the five-year average of 36%. Cutting in hard red winter wheat states, including Kansas, Texas and Oklahoma, has been delayed due to excessive precipitation.

 

Harvest delays could continue this week as there appears to be a near daily chance for thundershowers in southern Oklahoma and north-central Texas, according to the DTN Meteorlogix forecast. Any thundershower activity in Kansas should be confined to the southeast, Meteorlogix said.

 

Kansas harvested 20% of its winter wheat as of June 24, down from 77% last year and the five-year average of 49%, according to the USDA. Oklahoma harvested 52%, below last year's 97% and the five-year average of 86%. Texas harvested 45% of its winter wheat, down from 86% last year and 73% for the five-year average, the UDSA said.

 

There are also concerns about the quality of the HRW wheat being cut amid reports of disappointing yields and test weights.

 

"More reports of poor wheat yields coming from southern Plains wheat fields have been bullish fundamental inputs," a technical analyst said.

 

Bulls' next upside price objective is to close CBOT December wheat above resistance at the contract high of US$6.34, the analyst said. The next downside price objective for the bears is closing prices below psychological support at US$6.00.

 

First resistance is seen at Monday's high of US$6.19 and then at US$6.25. First support lies at Monday's low of US$6.09 1/2 and then at US$6.00.

 

At the Kansas City Board of Trade, a bullish pennant pattern has formed on the daily bar chart for December wheat, the technical analyst said.

 

Bulls' next upside price objective is closing KCBT December prices above solid resistance at the contract high of US$6.31. The bears' next downside objective is closing prices below solid support at 5.90.

 

First resistance is seen at Monday's high of US$6.01 and then at US$6.10. First support is seen at US$5.90 and then at US$5.85.

 

In other news, the USDA rated 79% of the U.S. spring wheat crop good-to-excellent, a six-percentage-point decline from the previous week. The decrease isn't much of a concern because the ratings were so high, an analyst said.

 

Warm-hot temperatures and less rainfall in the U.S. Northern Plains during the next seven days will favor developing spring wheat as recent wet conditions have increased diseases, according to Meteorlogix. However, very hot weather could increase stress to wheat in South Dakota, the weather firm said.