July 1, 2009

 

US Wheat Outlook on Wednesday: Seen up 7-10 cents in recovery from slide

 

 

U.S. wheat futures are expected to open higher Wednesday in a recovery from Tuesday's slide, but U.S. wheat remains too expensive to be competitive for business to Egypt, traders said.

 

Chicago Board of Trade September wheat is called to open 7 cents to 10 cents per bushel higher. In overnight electronic trading, CBOT September wheat was up 8 1/2 cents at US$5.49 1/4, and CBOT December wheat was up 9 1/4 cents at US$5.75.

 

Wheat is due for a rebound after falling Tuesday on pressure from limit-down CBOT corn and from a bearish U.S. Department of Agriculture acreage report, a CBOT floor trader said. As of Tuesday's close, CBOT September wheat had dropped US$1.61 1/4 from its June 1 high of US$7.02.

 

Weakness in the dollar and strength in other markets should help underpin wheat, traders said. CBOT November soybeans were up more than 15 cents overnight, and corn was a few cents higher.

 

Traders are waiting for the results of a tender from Egypt's state-owned General Authority for Supply Commodities. GASC said Tuesday it was tendering to buy 55,000 metric tonnes to 60,000 metric tonnes of wheat on a free on board basis.

 

U.S. wheat is priced too high to be competitive against French and Russian wheat, traders said. Last week, GASC said it bought 60,000 tonnes of French wheat in a tender.

 

In other news, Japan said it would tender for 200,000 tonnes of feed barley and 30,000 tonnes of feed wheat Wednesday. The shipments are expected to arrive between July and October.

 

Harvest pressure continues to hang over U.S. wheat markets, a trader said. Producers have seen favorable conditions for cutting, although private weather firm DTN Meteorlogix said scattered thunderstorms in the Plains this weekend will likely cause some harvest delays, especially over Kansas, Nebraska and Colorado.

 

"Harvest weather looks good and harvest pressure should continue for at least a few more days," according to a note from Mark Gold, managing partner of Top Third Ag Marketing. "The market is getting oversold and the funds are short, which means I would look for a rally once the hedge pressure eases off."

 

Dryness remains a concern for Argentine wheat areas of La Pampa and western Buenos Aires, Meteorlogix said. The areas should stay mostly dry during the next seven to 10 days, further increasing stress to the crop, the firm said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$5.42, a 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$5.80 and then at US$5.92 1/2. First support lies at US$5.60 and then at Tuesday's low of US$5.50.