July 31, 2007

 

US Wheat Outlook on Tuesday: Steady to start, with an eye on Europe

 

 

U.S. wheat futures are expected to start Tuesday's day session steady, with possible pressure seen from weakness in European markets, analysts said.

 

In e-CBOT overnight trading, Chicago Board of Trade September wheat fell 3/4 cent to US$6.36 3/4 per bushel, while CBOT December wheat ended down 2 1/4 cents at US$6.54 1/2.

 

It seems as though U.S. wheat futures have recently been following activity in the Paris and London markets, said Chad Henderson, analyst with Prime Agricultural Consultants. Paris-based Liffe milling wheat futures were lower earlier Tuesday as traders extended this week's corrective setback from record high prices.

 

"With the European trade a little bit lower, that's probably where the pressure is going to come from," Henderson said.

 

The U.S. Department of Agriculture's weekly crop progress report showed a decline in the condition of spring wheat, although the drop was not a big surprise, Henderson said. The agency rated 68% of the crop in good to excellent condition, down seven percentage points from the previous week.

 

In Montana, 42% of the crop was rated in good-to-excellent condition, down from 62% the previous week. In Idaho, 66% of the crop was seen in good-to-excellent condition, down from 70% a week earlier.

 

"I don't think it was unexpected," Henderson said about the ratings decrease. "We are moving to harvest right now."

 

The losses most likely are the result of damage from high temperatures, an analyst said. The U.S. Northern Plains are facing more hot, dry weather this week, although there is a chance of light to moderate rain Saturday favoring eastern areas, according to DTN Meteorlogix.

 

"Hot weather in western areas likely damaged filling wheat earlier in the month," Meteorlogix said. "The crop is too advanced at this time for any further damage in the US but is likely still causing some damage in southern Alberta and southwest Saskatchewan."

 

Wheat in western Europe, meanwhile, should see cool temperatures with occasional light to moderate showers through the end of this week, Meteorlogix said. More unsettled weather, which is unfavorable for the harvest, is possible next week, but conditions look better than they were last week, the weather firm said.

 

In West Australia, wheat fields are benefiting from "much improved moisture conditions," according to Meteorlogix. Drier weather develops during the next few days, but some rain may return early next week, the firm said.

 

Only some light rain is expected in Argentina's major wheat-growing areas during the next few days. The dominant weather pattern during the next seven days will be cool and dry, Meteorlogix said. More rain is needed for planting, emergence and development of the crop.

 

Wheat bulls still have the solid upside technical advantage, and there are no signs of a market top being close at hand, a technical analyst said.

 

The bulls' next upside price objective is to close CBOT December wheat above resistance at the contract high of US$6.78. The next downside price objective for the bears is closing prices below strong support at US$6.38 1/2, which would fill on the downside the upside price gap created on the daily bar chart last week.

 

First resistance is seen at Monday's high of US$6.66 1/2 and then at US$6.70. First support lies at Monday's low of US$6.49 and then at US$6.40.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is closing December wheat above solid resistance at the contract high of US$6.68 1/2. The bears' next downside objective is closing prices below solid support at US$6.26 a bushel, which would fill on the downside last week's upside price gap on the daily chart.

 

First resistance is seen at Monday's high of US$6.59 and then at the contract high of US$6.68 1/2. First support is seen at Monday's low of US$6.40 and then at US$6.35.

 

In other news, Japan said it was seeking 146,000 metric tonnes of wheat in a tender to be concluded Thursday. A shipment of 66,000 tonnes is expected to arrive Sept. 1-Oct., and a shipment of 80,000 tonnes is expected to arrive Oct. 1-31.