July 14, 2009

 

US Wheat Outlook on Tuesday: Seen steady-up on overnight, technical bounce

 

 

U.S. wheat futures are expected to start steady to higher Tuesday amid ideas the markets are due to extend Monday's technical bounce.

 

Chicago Board of Trade September wheat is called to open flat to up 2 cents per bushel. In overnight electronic trading, CBOT September wheat slipped 1/4 cent to US$5.42 1/2, while CBOT December wheat slipped 1/2 cent to US$5.68 1/2.

 

The markets could extend gains on continued short covering after climbing Monday, traders said. Speculative funds continue to hold a large short position in CBOT wheat, they said.

 

The fundamental outlook for wheat remains mostly bearish, a trader said, because global wheat supplies are considered ample and demand for U.S. wheat has been dragging. The U.S. soft red winter wheat harvest "is getting close to wrapping up, and quality in the northern states should make up for some early problems in the south," according to a note from Country Hedging.

 

Winter wheat was 66% cut as of Sunday, compared to 56% last week, and the five-year average is 69%, according to the U.S. Department of Agriculture. Harvest in Kansas was 96% complete, compared to the average of 95%.

 

U.S. spring wheat was rated 71% good to excellent, down one percentage point from last week. The crop will benefit from moisture this week and from a recent trend toward warmer temperatures, according to private weather firm DTN Meteorlogix.

 

In other news, Ukraine's wheat harvest this year is expected to contain a higher proportion of milling wheat than last year, and the milling wheat will be of a higher quality, according to national agricultural analyst APK-Inform. As of July 13, the total amount of wheat received by Ukraine's grain storage facilities contained 35% of milling grade wheat, up from 29% last year, it said.

 

Japan, meanwhile, said it was seeking 108,000 tonnes of wheat, including 87,000 tonnes of U.S. wheat, in a routine tender to be concluded Thursday. The shipment is expected to arrive in September.

 

The next downside price objective for bears is pushing and closing CBOT December wheat below solid technical support at US$5.38, 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 US$5.70 3/4 and then at US$5.80. First support lies at US$5.63 and then at US$5.50, the analyst said.