July 29, 2009

 

US Wheat Outlook on Wednesday: Steady-down 2 cents; weak demand, strong crop

 

 

U.S. wheat futures are expected to open steady to slightly lower Wednesday as weak demand and good crop potential keep the market under pressure, analysts said.

 

Chicago Board of Trade wheat is called mixed to down 2 cents. In overnight trade, CBOT September wheat was down 1/4 cent to US$5.16 per bushel and December wheat was down 1/2 cent to US$5.43 1/4.

 

There is little if any bullish news for traders to digest in the market. Both wheat and corn prices sagged Tuesday despite a strong rally in soybeans.

 

"For wheat in particular, the stress of prices continuing to linger around the key July low of US$5.12 in the September contract is almost too much to bear," Mike Zuzolo, senior analyst for Risk Management Commodities, said in a market commentary.

 

The trade is keeping on eye on Commodity Futures Trading Commission hearings in Washington, and is concerned that the government will limit the role of index funds in the markets, a move that would be considered bearish.

 

Meanwhile, U.S. crops look strong. Field surveys on the first day of the Wheat Quality Council's annual U.S. spring wheat tour showed the crop has the potential to produce the highest yield in years, scouts said.

 

Based on surveys on 165 fields Tuesday, the average yield calculated for hard red spring wheat was 45.7 bushels per acre, up from the 37.6 bushels last year. That is the highest yield calculated on the first day of the tour since at least 2001, according to data from the council.

 

"This obviously is a monster crop so far on the first day," a veteran tour scout said.

 

Traders and analysts are looking in vain for signs elsewhere in the world that the crop could be troubled.

 

"They're all worried El Nino's going to wipe out the Australian crop, but it hasn't done so so far," an analyst said.

 

In other news, analysts said that Egypt has ordered the re-export of 45,000 metric tonnes of wheat from Ukraine and Australia, claiming it was unfit for human consumption.

 

The next downside price objective for the bears is pushing and closing December prices below solid technical support at the July low of US$5.38, a technical analyst said. The next upside price objective is to push and close July futures prices above solid technical resistance at the July high of US$5.80 a bushel.

 

First resistance is seen at Tuesday's high of US$5.55 1/2 and then at US$5.65, the technical analyst said. First support lies at Tuesday's low of US$5.42 and then at US$5.38.