July 25, 2007

US Wheat Outlook on Wednesday: Steady-weaker opening seen

U.S. wheat futures are seen opening steady to slightly lower when open-outcry trading begins in Chicago Wednesday morning. A corrective pullback would not be surprising after Tuesday's big gains in wheat futures, said an analyst.

In overnight e-cbot trading, December Chicago wheat futures were down 1 3/4 cents at US$6.57 1/4.

In overnight news, Dow Jones Newswires reported results from Germany's 2007 grain harvest are showing wheat yields significantly lower than last year, due to inclement growing and harvesting weather. Yields are reported down 10% to 15% from those seen last year.

While recent heavy rains in European Union wheat regions have likely reduced production potential, concerns in the wheat market are mounting regarding the condition of the spring wheat crop in the northern U.S. Plains states. The latest National Weather Service 6-10 day forecast for July 30 to Aug. 3 calls for above-normal temperatures over much of the U.S. midsection, with the warmest readings expected in north-central areas - spring wheat country.

Crop scouts on the first day of the Wheat Quality Council HRS wheat tour through North Dakota uncovered a better-than-average spring wheat crop. Day one sample results produced an average yield of 36.2 bushels per acre in eastern and central North Dakota, up five bushels from last year's sampling of the same area. Tour sampling will continue Wednesday and Thursday.

Technically, December Chicago wheat bulls still have the upside technical advantage, amid no signs of a market top being close at hand, said a market technician. The bulls' next upside price objective is to close prices above resistance at the contract high of US$6.64 a bushel. The next downside price objective for the bears is closing prices below strong support at US$6.30 a bushel. First resistance is seen at the contract high of US$6.64 and then at US$6.70. First support lies at Tuesday's low of US$6.48 1/2 and then at US$6.38 1/2 - the bottom of Tuesday's upside price gap on the daily bar chart.

December K.C. HRW wheat bulls' next upside price objective is closing prices above solid resistance at the contract high of US$6.49 a bushel, said the market technician. The bears' next downside objective is closing prices below solid support at US$6.26 a bushel, which would fill on the downside Tuesday's upside price gap on the daily chart. First resistance is seen at the contract high of US$6.49 and then at US$6.55. First support is seen at Tuesday's low of US$6.36 and then at US$6.30.