July 10, 2008

 

US Wheat Outlook on Thursday: 2-4 cents down on USDA expectations, weak corn

 

 

Bearish expectations for increases in U.S. production and carryout estimates are expected to press down U.S. wheat futures at the start of Thursday's day session.

 

Chicago Board of Trade September wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT September wheat slipped 3 3/4 cents to US$8.22, while CBOT December wheat dipped 3 3/4 cents to US$8.45 1/2.

 

Carryover pressure from the overnight should weigh on wheat amid bearish ideas the U.S. Department of Agriculture will raise its forecasts for U.S. 2008-09 wheat production and ending stocks, traders said. The increases are expected in USDA crop reports due out at 8:30 a.m. EDT Friday.

 

Analysts predict the USDA will boost its projections due to reports of strong yields in the ongoing winter wheat harvest. The spring wheat crop also has the potential to produce good yields, they said.

 

"It'd be hard to find anyone expecting a bullish report for wheat," a CBOT floor trader said.

 

Weakness in CBOT corn also should be a bearish influence on the wheat markets, as wheat has looked to corn recently for direction, traders said. Wheat and corn are linked because both are used for animal feed.

 

Wheat could find some support from market chatter about delays in the U.S. soft red winter wheat harvest, a CBOT floor broker said. Periodic shower activity is forecast for the Midwest and the Delta, according to DTN Meteorlogix.

 

The U.S. winter wheat harvest was 52% complete as of Sunday, compared to the average of 61%, according to the USDA. Cutting was notably behind in SRW wheat states, such as Illinois, where harvest was 55% complete, compared to the average of 90%.

 

Still, possible crop losses due to cutting delays would not be that big of a deal considering reports of strong yields, the broker said. There is plenty of wheat to go around in the U.S. and the world due to expanded plantings and mostly favorable growing weather, he said.

 

Weekly U.S. wheat export sales of 617,100 metric tonnes were "solid" and slightly above trade expectations, which ranged from 400,000 to 600,000 tonnes, a trader said. However, the U.S. is still at a competitive disadvantage to wheat from the Black Sea region, he said.

 

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.

 

First resistance is seen at Wednesday's high of US$8.66 3/4 and then at US$8.77. First support lies at Wednesday's low of US$8.44 1/2 and then at this week's low of US$8.36.