June 29, 2007

 

US Wheat Outlook on Friday: 15-20 cents up on spillover, follow-through

 

 

U.S. wheat futures are called to open Friday's day session 15-20c cents higher on follow-through from the overnight, spillover support and continued concerns about production problems, floor traders said.

 

Wheat futures made strong gains overnight ahead of the release of the U.S. Department of Agriculture's June acreage and quarterly stocks reports. Chicago Board of Trade July wheat ended 11 cents higher at US$6.20 per bushel in e-cbot trading, while CBOT September wheat closed 14 3/4 cents higher at US$6.38 1/2.

 

Euronext.liffe wheat futures also rose sharply early Friday to reach new multi-year highs. Paris-based November milling wheat was up EUR4 or 2.2% at EUR185 a metric tonne, with 1,185 lots traded, as of 0952 GMT. EUR185/tonne is a new all-time high in the second month chart and well above the previous high set Thursday of EUR181.75/tonne.

 

The USDA acreage report was largely neutral for wheat but "extremely bullish" for soybeans, traders said. Wheat should feel some borrowed strength from the soybean market, they said.

 

The USDA estimated spring wheat plantings at 13.144 million acres, below the average pre-report analyst estimate of 13.835 million and the agency's March estimate of 13.808 million. In 2006, spring wheat was seeded on 14.899 million acres.

 

The lower-than-expected spring wheat acreage number is friendly for Wheat futures, but an increase in estimated all-wheat acreage is negative, a CBOT floor broker said. The USDA put all wheat acres at 60.505 million, above the average analyst estimate of 60.35 million and the agency's March estimate of 60.303 million.

 

U.S. wheat markets should trade data from the report "for about five seconds" before refocusing their attention on weather problems in growing areas around the world, a CBOT floor broker said. Hard red winter wheat in the U.S. Southern Plains is being pounded with too much rain, while Ukraine is too dry, he said.

 

"There are still bullish fundamentals at work supporting the wheat market, including tightening world supplies and too much rain hampering the U.S. HRW harvest," a technical analyst said.

 

Southeast Kansas, Oklahoma outside of the panhandle and north-central Texas should stay in an extremely wet weather pattern, DTN Meteorlogix said.

 

In the Northern Plains, dryness and some hot weather may increase stress to spring wheat areas in Montana and South Dakota, Meteorlogix said. However, the North Dakota region and northern Minnesota will not be hot enough or dry enough to cause significant stress and may even benefit from the warm, dry pattern, the weather firm said.

 

The wheat in West Australia will benefit from shower activity during the weekend and Monday, Meteorlogix said. After Monday it looks to go drier again. In Argentina, however, dry weather continues to slow planting and emergence of the crop, especially through the southwest.

 

The USDA estimated U.S. wheat stocks as of June 1 at 456 million bushels, above the average analyst estimate of 422 million. The USDA's March 1 estimate for quarterly wheat stocks was 856 million and the June 1, 2006 estimate was 571 million.

 

Wheat bulls still have strong upside technical momentum and are looking for more on the upside in the near term, the technical analyst said. Their next upside price objective is to close CBOT December wheat above resistance at the contract high of US$6.46. The next downside price objective for the bears is closing prices below psychological support at US$6.00.

 

First resistance is seen at Thursday's high of US$6.38 and then at US$6.46. First support lies at Thursday's low of US$6.29 1/2 and then at US$6.25.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing December wheat above solid resistance at the contract high of US$6.31, the analyst said. The bears' next downside objective is closing prices below solid support at US$6.00 a bushel.

 

First resistance is seen at Thursday's high of US$6.26 and then at US$6.31. First support is seen at Thursday's low of US$6.18 and then at US$6.10.

 

In other news, the Canadian Wheat Board has raised its monthly price projections for most grades of wheat and durum that will be sold during the upcoming 2007-08 crop year, which begins Aug. 1. World weather conditions during the past month along with tight global supplies have created significant price support, the CWB said.