July 9, 2007

 

US Wheat Outlook on Monday: 3-5 cents lower, taking cue from e-CBOT

 

 

U.S. wheat futures are expected to start Monday's day session 3-5 cents lower per bushel, with the markets taking their cue from overnight weakness, traders said.

 

In e-cbot trading, Chicago Board of Trade September wheat slipped 2 cents to US$6.08, while CBOT December wheat fell 2 cents to US$6.20 1/2.

 

There may be some follow-through consolidation as the trade looks ahead to the release of the U.S. Department of Agriculture's supply/demand report on July 12, an analyst said. Overnight declines in CBOT corn and soybeans also may tug on wheat, a floor trader said.

 

The longer-term outlook for wheat, however, remains firm amid historically tight global stocks and production problems, he said. The U.S. has seen solid demand for its wheat lately, which is supportive, traders said. News reports and market chatter indicate Brazil may enter the market to buy more wheat.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at US$6.35 a bushel, a technical analyst said. The next downside price objective for the bears is closing below psychological support at US$6.00, which would also almost fill on the downside last week's upside price gap on the daily bar chart.

 

First resistance is seen at Friday's high of US$6.24 and then at US$6.30. First support lies at Friday's low of US$6.11 1/2 and then at US$6.06 1/2.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing December wheat above solid resistance at US$6.31, the analyst said. The bears' next downside objective is closing prices below solid support at US$6.00, which would also nearly fill on the downside last week's upside price gap on the daily bar chart.

 

First resistance is seen at Friday's high of US$6.19 and then at US$6.25. First support is seen at Friday's low of US$6.10 and then at US$6.06.

 

Scattered to widely scattered thunderstorms will be in the U.S. Southern Plains early this week, causing some problem for the lingering hard red winter wheat harvest in a few locations, DTN Meteorlogix said.

 

Spring wheat growing-areas of the Northern Plains should be drier for the balance of the week after seeing some moisture during the weekend, Meteorlogix said. Hot weather may return to the western areas late in the week, the weather firm said.

 

In the Black Sea region, drought-stricken eastern Ukraine and southern Russia saw few showers and some cooler temperatures during the weekend. It should be hotter and drier during the next several days before cooler weather returns by next weekend, Meteorlogix said.

 

Ukraine harvested 3 million metric tonnes of wheat on 1.6 million hectares to July 5, which is 29% of the planned total area, the agriculture ministry said Monday. The average yield to date was 1.89 tonnes a hectare, which is nearly 0.8 tonnes less than on the same date last year.

 

However, the average yield on July 5 increased from the 1.8 tonnes/hectare reported July 3. The reason for this is that farmers first harvest areas where crops have been damaged by drought, where yields are lower, so that eventual yields are likely to be higher than the current ones.

 

Ukraine's wheat harvest this year is likely to fall to 11.7 million tonnes from 13.9 million tonnes in 2006 because of drought, the agriculture ministry said.

 

In Argentina, dry weather continues to slow wheat planting and emergence, especially through the southwest, Meteorlogix said. There is no significant rainfall expected for at least the next seven days.

 

The Buenos Aires Cereals Exchange said Argentina's 2007-08 wheat crop is developing slowly in the southern parts of the country due to repeated frosts. A shortage of diesel and urea fertilizer has also complicated planting, the exchange said.

 

In Australia, winter crops in Australia's New South Wales state, which produces about 31% of the country's wheat, have gotten off to a good start as rains in late April and other precipitation events have allowed nearly all intended sowings to be planted on time for the first time since 2001, the government said. Wheat plantings have jumped to 3 million hectares from the area harvested last year of 1.8 million hectares, the government said.

 

In other news, Iraq is about to finalize deals with Turkish companies to supply some 400,000 tonnes of wheat flour, traders in Baghdad said Monday.

 

China's new wheat prices, meanwhile, continue to rise in the week to Monday on increasing demand, while old wheat prices were mostly stable, analysts said. New white wheat prices in Shandong province, a major wheat producing region, rose RMB10-RMB20 from a week ago to RMB1,420-RMB1,520 a metric tonne.