July 9, 2008

 

US Wheat Outlook on Wednesday: seen mixed, still watching CBOT corn

 

 

U.S. wheat futures are called to start Wednesday's day session mixed, with traders expecting to see some technical buying and the markets still keeping an eye on weak Chicago Board of Trade corn.

 

In overnight electronic trading, CBOT September wheat rose 1/2 cent to US$8.37 per bushel. CBOT December wheat crept 1/4 cent higher to US$8.60.

 

Technical buying could lend some support to wheat, as the markets are in an oversold condition after a steep sell-off Monday, an analyst said. However, wheat will continue to watch CBOT corn for direction, he said.

 

Wheat is linked to CBOT corn, which was weaker overnight, because both are used for animal feed. The grains could possibly find some strength from weakness in the U.S. dollar and firm CBOT soybeans and crude oil, traders said.

 

News that Egypt's state-owned General Authority for Supply Commodities bought 290,000 metric tonnes of optional-origin wheat is not expected to have a major impact on the market because it was all in-store, a CBOT floor trader said. All of the wheat purchased was through local traders for delivery Aug. 15-31.

 

Of the total, GASC bought 240,000 tonnes of U.S. soft red winter, Canadian, Russian, or Ukraine wheat from. GASC also bought 50,000 tonnes of Russian or Ukraine wheat.

 

"We've got a lot of wheat around" in the world, the CBOT trader said.

 

The markets are starting to look ahead to the U.S. Department of Agriculture's supply and demand report due out Friday. Traders are "nervous" about the potential for increased U.S. production and carryout estimates, which could be bearish for the markets, an analyst said.

 

A strong global crop is expected in 2008-09 due to expanded plantings and mostly favorable weather. French 2008-09 soft wheat production will total 36.6 million metric tonnes, a 20% rise on the year due to improved growing conditions, according to forecasts by L'Office National Interprofessionnel des Grandes Cultures.

 

In other news, Japan bought 128,000 metric tonnes of wheat, including 61,000 tonnes of U.S. wheat in a routine tender. The shipment is expected to arrive in August.

 

Bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at this week's high of US$9.05, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.00, he said.

 

First resistance is seen at Tuesday's high of US$8.69 and then at US$8.77. First support lies at US$8.50 and then at Tuesday's low of US$8.36.

 

Pressure from the advancing U.S. winter wheat harvest continues to hang over the markets, a trader said. Weather in crop areas of the Midwest and Plains looks as though it will be dry enough to allow more wheat cutting, a trader said.