June 27, 2008

 

US Wheat Outlook on Friday: Seen up 10-12 cents on firm corn, wet weather

 

 

Spillover support, technical buying and wet weather concerns are expected to support U.S. wheat futures at the start of Friday's day session.

 

Chicago Board of Trade September wheat is called to open 10 to 12 cents per bushel higher. In overnight electronic trading, CBOT September wheat jumped 7 1/4 cents to US$9.50, and CBOT December wheat rose 8 cents to US$9.73 3/4.

 

Wheat should feel borrowed strength from CBOT corn, which was firmer overnight along with soybeans. A rally in crude oil futures and weakness in the U.S. dollar index are seen as supportive for the grains.

 

"Wheat should continue to ride the coattails of the corn market higher today," said Bryce Knorr, senior editor for Farm Futures.

 

Short-covering has helped boost wheat this week and should continue to be a feature in the trade, an analyst said. There will be positioning ahead of the release of the U.S. Department of Agriculture's acreage and quarterly stocks reports, due out at 8:30 a.m. EDT Monday, he said.

 

The markets are more interested in acreage numbers for corn and soybeans than for wheat after severe Midwest floods damaged the row crops. Analysts expect only modest adjustments to estimates for 2008-09 wheat acreage from the USDA's March prospective plantings report, with slight declines seen in spring wheat plantings due to crop switching.

 

Monday also is first notice day for deliveries against July wheat futures.

 

"Monday's USDA reports won't say a whole lot about wheat," Knorr said. "But with wheat priced as a feed grain in many areas, it's continuing to be bought both outright and by spreaders."

 

There continue to be some concerns that wet weather is lowering quality and delaying harvest of the U.S. winter wheat crop, traders said. The Midwest is on track to see "frequent periods with thunderstorms and only minor, 1-3 day periods, of drier weather," according to DTN Meteorlogix.

 

Thunderstorms through central and east Kansas, meanwhile, appear to have been heavier than expected overnight, Meteorlogix said. There also appears to be a higher risk for heavier storms over eastern and southern crop areas Friday and Saturday, the private weather firm said.

 

Western Australia's crop outlook slipped following dry weather in May and June over the region's vast wheat belt, said the manager of operations at Cooperative Bulk Handling Ltd., a logistics concern. The dry conditions raised the specter of this year's wheat crop failing to reach last year's drought-reduced output, the manager said. However, there is a good chance for significant shower activity in West Australia wheat areas Friday into Saturday, according to Meteorlogix.

 

The next upside price objective for the bulls is to push and close CBOT December wheat above major psychological resistance at US$10.00, a technical analyst 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 Thursday's high of US$9.94 3/4 and then at US$10.00. First support lies at Thursday's low of US$9.40 3/4 and then at US$9.25.