July 21, 2009

 

US Wheat Outlook on Tuesday: Seen 2-4 cents down, waiting for GASC results

 

 

U.S. wheat futures are expected to start weaker Tuesday after slipping overnight, with traders waiting to see the results of an Egyptian tender.

 

Chicago Board of Trade September wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT September wheat lost 3 3/4 cents to US$5.38 1/2, and CBOT December wheat fell 3 cents to US$5.65 3/4.

 

Trading will likely remain choppy and range-bound amid ideas that world supplies remain comfortable, a CBOT floor trader said. Speculative funds continue to hold a large net short position in CBOT wheat, which is seen as supportive, he said.

 

Egypt's state-owned General Authority for Supply Commodities said it was tendering to buy 55,000 to 60,000 metric tonnes of wheat on a free-on-board basis. The U.S. could sell "a cargo or two from the east coast" to GASC, a CBOT floor trader said.

 

U.S. wheat has become more competitive on the world export market following a recent setback in prices, a trader said. GASC has booked French and U.S. wheat in each of its past two tenders.

 

Weather looks mostly favorable for wheat, a trader said. Showers have been reported in the Argentina, which has struggled with dryness, during the past 24 hours.

 

"Wheat is under stress due to continued drought in the southwest but the north and east is doing better," said Joel Burgio, meteorologist for private weather firm DTN Meteorlogix.

 

In the Canadian Prairies, crops will mostly benefit from warmer temperatures, as development of crops is still significantly behind normal, Meteorlogix said. However, more rainfall is still needed in the west after an early season drought.

 

Spring wheat in the northern U.S. Plains also will "mostly benefit" from the hotter trend, except possibly in the west where it may be too dry, according to Meteorlogix. Showers in central and eastern areas will favor crop growth, the firm said.

 

The condition of spring wheat improved to 73% good to excellent from 71% a week earlier, the U.S. Department of Agriculture said in a weekly crop progress report. The USDA said 84% of the U.S. crop was headed, compared to 93% last year and the average of 93%.

 

Mild conditions in the U.S. Midwest are favorable for corn and soybeans, which are called to open lower after falling overnight, a trader said. Wheat could feel some pressure from weakness in the row crops, although outside markets look supportive, he said. Crude oil is higher, and the U.S. dollar is lower.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$5.38, a technical analyst said. The 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$5.80 and then at US$5.90. First support lies at Monday's low of US$5.58 1/2 and then at US$5.50.