July 6, 2009

 

US Wheat Outlook on Monday: Lower on corn, soy pressure

 

 

U.S. wheat futures are poised to start lower Monday on pressure from other markets but could find some support from expectations that U.S. winter wheat harvest is nearing completion, analysts said.

 

Chicago Board of Trade September wheat is called to open 4 cents to 6 cents per bushel lower. In overnight electronic trading, CBOT September wheat fell 5 cents lower at US$5.24, and CBOT December wheat was down 6 1/4 to US$5.48 3/4.

 

Weakness in CBOT corn and soybeans should drag down wheat in early dealings, with soybeans set to lead the downside after tumbling overnight, analysts said. Strength in the U.S. dollar is seen as a bearish influence on the grains.

 

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$6.00, he said.

 

First resistance is seen at Thursday's high of US$5.67 3/4 and then at US$5.75. First support lies at Thursday's low of US$5.54 1/2 and then at last week's low of US$5.50.

 

Wheat should be "soft because of corn and beans dropping but will also try to find some support from harvest ending" and from expectations of improved demand, said Brian Hoops, president of Midwest Market Solutions. Demand could increase now that harvest is winding down and following a small purchase of U.S. wheat last week by Egypt, he said.

 

The U.S. Department of Agriculture will issue an update on harvest progress at 4 p.m. EDT in its weekly crop progress report. The U.S. winter wheat harvest "should be mostly wrapped up by the end of this week, with the cooperation of decent weather," according to a note from Country Hedging.

 

Thundershowers during the weekend may have caused a few delays to the wheat harvest in the central and southern U.S. Plains, but this week's weather looks more favorable, private weather firm DTN Meteorlogix said in a forecast. Weather for spring wheat in the northern Plains looks "generally favorable" for the developing crop, it said. Dryness remains a serious concern in Argentina, with the weather pattern favoring below-normal rainfall chances during the next 10 days, according to the firm.

 

In Australia, Rabobank Australia Ltd. trimmed its forecast for the 2009-10 wheat crop to 22.8 million tonnes from 23 million tonnes a month ago and warned the impact from a likely El Nino climate episode could drive the number sharply lower. Commonwealth Bank of Australia last week said production from Australia's new wheat crop should reach 22.5 million.

 

The USDA in June estimated Australia's crop, which is harvested in the fall, at 23 million. The government is slated to issue an updated forecast Friday in a monthly supply/demand report.