July 29, 2008

 

US Wheat Outlook on Tuesday: Down on outside pressure in light trade

 

 

U.S. wheat futures are expected to open slightly lower Tuesday as wheat follows outside markets amid low-volume trading, analysts said.

 

Wheat is called 3 to 5 cents lower. In overnight trading, September wheat was down 2 3/4 cents to US$7.95 per bushel, December wheat was down 3 cents to US$8.18 3/4 and March wheat was down 4 cents to US$8.39 3/4.

 

The market will take its cue from what happens in other markets, a trader said, amid little strong fundamental news to move the market. Weaker soybeans in particular will pressure wheat, an analyst said.

 

The market swung by almost 30 cents Monday, and the volatility will continue to make traders cautious and limit volume, a trader said. An analyst said low volume during Monday's trade showed there were "a lot of weak holders on the long side and a lot of weak holders on the sell side."

 

The analyst added that wheat seemed to fall apart Monday after failing to break through its 50-day moving average, above US$8.31.

 

The trade will be looking to news from a meeting of the Commodity Futures Trading Commission's Agricultural Advisory Committee scheduled Tuesday, traders said. The meeting will address a lack of convergence between cash and futures prices and is scheduled to last all day.

 

The market will look for signs that the government is poised to aggressively address the issue, which could hurt future prices, but a trader said he was not expecting significant news from the meeting.

 

"It will be a lot of jawboning, people jockeying for positions," a trader said.

 

Analysts said the U.S. Department of Agriculture's crop progress report, released Monday, should not have a significant effect on the market. The USDA said the good-to-excellent condition rating for the U.S. spring wheat crop dropped to 60% this week from 63% last week.

 

According to the report, North Dakota's good-to-excellent rating fell to 54% from 60% a week earlier.

 

The USDA said 79% of the U.S. winter wheat crop was harvested, up from 71% last week, but below the five-year average of 86%.

 

Arkansas, Kansas, Missouri and North Carolina are all 100% harvested, but South Dakota's harvest is severely delayed due to wet fields. At 22%, South Dakota's crop is 61 percentage points behind its five-year average.

 

In export news, Egypt's state-owned General Authority for Supply Commodities said Monday it was tendering to buy 55,000 to 60,000 metric tonnes of wheat for shipment Sept. 1-15 on a cost and freight basis. GASC is looking to buy U.S. soft red, soft white, or hard red wheat, Canadian wheat, French wheat and U.K. wheat, a GASC official said.

 

On Tuesday, GASC said it bought 207,500 metric tonnes of Russian and/or Ukraine wheat on a cost and freight basis.

 

A technical analyst said a five-week-old downtrend is in place on the daily bar chart. The next downside price objective is pushing and closing December prices below solid technical support at last week's low of US$7.98. The next upside price objective is to push and close December futures prices above solid technical resistance at Monday's high of US$8.55 a bushel, the technical analyst said.

 

First resistance is seen at US$8.42 and then at Monday's high of US$8.55, the technical analyst said. First support lies at Monday's low of US$8.18 1/2 and then at US$8.09.