July 3, 2008

 

US Wheat Outlook on Thursday: 2-4 cents lower on profit-taking, weak corn

 

 

Profit-taking and weakness in corn should pressure U.S. wheat futures at the start of Thursday's day session, with traders seen reluctant to press the market too hard in either direction ahead of the holiday weekend.

 

Chicago Board of Trade September wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT September wheat slid 2 1/4 cents to US$8.78, while CBOT December wheat slipped 3 cents to US$9.00 1/2.

 

Wheat jumped Wednesday for the second consecutive session amid spillover support from the row crops, particularly CBOT corn, a CBOT floor trader said. Wheat is "the weakling" in the markets and should maintain its role as a follower, he said.

 

Trading is expected to be thin Thursday going into the three-day July 4 weekend, although the markets could still see big price swings, a trader said. Sky-high prices for the row crops and uncertainties about weather are making the markets jittery, he said.

 

A few thundershowers are causing some local harvest delays in wheat areas of the central and southern Plains, although some areas may miss this rain, DTN Meteorlogix said. In the Midwest, the weather pattern continues to feature at least some chance for thundershowers and no significant heat in the region, the private weather firm said.

 

In Australia, there appears to be some promise of more important rain for the key wheat areas of South Australia, Victoria and New South Wales during the period Sunday through Tuesday of next week. Australia's most active wheat future contract - ASX January 2009 - fell Thursday on expectations for wetness in the eastern growing areas.

 

National Australia Bank Ltd. on Thursday held its 2008 production forecast for the wheat crop to be harvested later in the year unchanged from mid June at 24.3 million metric tonnes. On Wednesday the government's Australian Bureau of Agricultural and Resource Economics reiterated its forecast of 23.7 million tonnes, 82% more than output of 13.0 million tonnes last year.

 

CBOT wheat has climbed for the past two day sessions. In the near term, major resistance for CBOT December wheat lies at US$9.94 3/4 to US$10.00, a technical analyst said.

 

"Bulls would need to conquer that ceiling to turn the intermediate-term outlook positive and keep the recent uptrend alive," the analyst said. "While the short term technical tone has been mostly positive since the beginning of June, the dominant longer-term trend is still bearish in the wake of the mid March-late May price collapse."

 

Bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at US$9.94 3/4, the analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.77.

 

First resistance is seen at US$9.08 and then at US$9.45. First support lies at Wednesday's low of US$8.80 and then at US$8.50.

 

In other news, U.S. weekly wheat export sales of 668,100 tonnes were seen as "solid" and above trade estimates, which ranged from 200,000 to 600,000 tonnes. The sales for the week ended June 26 were up 34% from the previous week, according to the U.S. Department of Agriculture.