August 4, 2009

 

US Wheat Outlook on Tuesday: Seen down in setback from Monday's gains

 

 

U.S. wheat futures are poised to start weaker Tuesday in a setback from Monday's gains and amid pressure from other markets.

 

Chicago Board of Trade September wheat is called to open 5 to 10 cents per bushel lower. In overnight electronic trading, CBOT September wheat tumbled 10 1/2 cents to US$5.38 3/4, and CBOT December wheat sank 10 3/4 cents to US$5.66 1/2.

 

CBOT corn and soybeans, which climbed Monday, are expected to start lower and should weigh on wheat, traders said. The markets are due for a correction as Monday's rallies were "overdone," a CBOT floor analyst said.

 

Outside markets that helped grains rise Monday also are not looking supportive, traders said. Crude oil is falling, and the U.S. dollar was not providing strong direction. A drop in the dollar Monday was seen as friendly for the grains.

 

"It's Turnaround Tuesday," the floor analyst said.

 

The next key upside objective for bulls is to close CBOT December wheat above the July 20 daily swing high at US$5.79 1/2, a technical analyst said. The market edged above that level during Monday's day session but did not settle above it.

 

"A solid close above the July 20 high would confirm an intermediate-term bottom on the daily wheat chart," he said.

 

First resistance is seen at US$5.79 1/2 and then US$5.84 1/2. First support lies at US$5.64 1/2 and then at US$5.56, Friday's high and the gap bottom.

 

The markets probably won't find much support from a decline in condition ratings for U.S. spring wheat, an analyst said. The U.S. Department of Agriculture said 71% of spring wheat was in good-to-excellent condition as of Sunday, down from last week's rating of 74%.

 

Despite the reduced ratings, the crop is still in good condition, an analyst said. The USDA said 3% was harvested, down from the average of 15%.

 

Development of spring wheat lagged this season due to late planting caused by cool, wet weather. Episodes of rain and near-to-below normal temperatures in the northern U.S. Plains will favor the crop, according to private weather firm DTN Meteorlogix.

 

Favorable weather is expected over northern and eastern areas of Russia and Kazakhstan, the firm said in a forecast. No significant rainfall is on tap during the next 6-10 days in Argentina, which is suffered from an ongoing drought, it said.

 

Sluggish export business remains bearish for the markets, an analyst said. There was little fresh demand news overnight, aside from Japan announcing it was seeking 148,000 tonnes of wheat in a routine tender to be concluded Thursday, he said.