August 11, 2009
US Wheat Outlook on Tuesday: Seen up 3-5 cents on pre-report positioning
U.S. wheat futures are expected to start higher Tuesday on positioning in front of government crop reports and short-covering following losses last week, traders said.
Chicago Board of Trade September wheat is called to open up 3 cents to 5 cents per bushel. In overnight electronic trading, CBOT September wheat gained 4 1/2 cents to US$4.98 3/4 a bushel, and CBOT December wheat rose 4 1/2 cents to US$5.24 1/2.
Traders will be evening up positions before the U.S. Department of Agriculture issues crop production and supply/demand reports at 8:30 a.m. EDT Wednesday, traders said. The reports are more important for corn and soybeans than for wheat, and wheat traders will keep an eye on the neighboring markets for direction, they said.
Strength in corn and soybeans overnight should help create a positive tone for wheat, a trader said. Outside markets look supportive, he said.
"The trade will continue to be 'getting smaller' in their positions ahead of the USDA reports tomorrow morning," AgResource Co. said in a market comment.
The USDA said 72% of the U.S. spring wheat was in good-to-excellent condition as of Sunday, up one percentage point from last week. The improved rating was a bit of a surprise, as traders had expected to see a decline of 1 to 2 percentage points.
Strong crop ratings are "convincing traders USDA will increase its forecast of production on Wednesday," according to a note from Farm Futures. "That could lead to an increase in ending stocks as well, due to slow export sales," the note said.
Spring wheat was 8% harvested, down from 15% last year and the average of 31%, the USDA said. Development has been slow this summer due to cool weather and late plantings.
Rain is expected to return to spring wheat areas of the northern U.S. Plains later this week, which will "favor filling wheat but it will also delay the harvest and is unfavorable for maturing wheat," according to private weather firm DTN Meteorlogix. In Canada, crops have benefited from a recent warming trend, but the prairies may turn cooler again in a few days time, the firm said.
Argentina continues to struggle with dryness. A few showers will be in the region later this week but probably not enough to reverse the recent drying trend, Meteorlogix said.
In other news, Indian millers have urged the government to quickly release wheat from its reserves into the local market to check rising prices on concerns over weak monsoon rains and firming festival season demand, industry officials said. The price of wheat in the spot market has risen to INR1,175 per 100 kilograms from INR1,110 in a month on fears of a shortage.
The next downside price objective for the bears is pushing and closing CBOT December wheat below major psychological support at US$5.00, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.55, he said.
