August 12, 2009
US Wheat Outlook on Wednesday: Seen lower; USDA confirms big supplies
U.S. wheat futures are expected to start weaker Wednesday as the U.S. Department of Agriculture confirmed expectations for increased production and ending stocks.
Chicago Board of Trade September wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT September wheat fell 3 3/4 cents to US$4.81 1/2, while CBOT December wheat dropped 3 1/2 cents to US$5.09.
The USDA raised its forecast for U.S. all-wheat production to 2.184 billion bushels from its July estimate of 2.112 billion. The average of analysts' estimates was 2.15 billion.
The USDA pegged the spring wheat crop at 548 million bushels, above the average trade estimate of 523 million and the USDA's July estimate of 506 million. The durum crop was estimated at 98 million, above the average trade estimate of 85 million and the USDA's July estimate of 81 million.
The wheat numbers were "not all that surprising" as analysts had expected the USDA would raise its projections, said Jerry Gidel, analyst for North America Risk Management Services. The estimate for 2009-10 U.S. wheat carryout of 743 million was "substantial" but not overly surprising, he said.
World supplies also expanded. The USDA pegged global carryover at 183.56 million tonnes, up from its July estimate of 181.3 million, and world production at 659.29 million tonnes, up from the July estimate of 656.48 million.
"The wheat market's going to continue to be a drag," Gidel said.
Nearby CBOT September wheat on Tuesday in open outcry trading set a fresh contract low of US$4.85. Wheat bears have the "solid overall near-term technical advantage," a technical analyst said.
The next downside price objective for bears is pushing and closing CBOT December wheat below major psychological support at US$5.00, he said. Bulls' next upside price objective is to push and close July futures prices above solid technical resistance at US$5.55, he said.
First resistance is seen at this week's high of US$5.26 3/4 and then at the July low of US$5.32 3/4, the technical analyst said. First support lies at Tuesday's low of US$5.10 3/4 and then at US$5.00, he said.
Aside from the USDA data, there was a lack of fresh news out for wheat overnight, traders said. Traders are keeping an eye on the weather in the northern U.S. Plains as spring wheat harvest creeps forward.
Hot, dry weather favors the maturing crop and the harvest, according to private weather firm DTN Meteorlogix. Cool, wet weather is expected to develop over the weekend, slowing the harvest, the firm said.
Dryness continues to be a worry in Argentina, although some rain is expected over the weekend, favoring northern and eastern areas, Meteorlogix said. The USDA cut is forecast for Argentina's crop to 8.5 million tonnes from its July estimate of 9.5 million.
In other international adjustments, the USDA raised its estimate for the E.U.-27 crop to 136.29 million tonnes from 134.65 million last month. Canada's crop was trimmed to 22.5 million from 23.5 million in July.
