September 15, 2009

 

US Wheat Outlook on Tuesday: Up on overnight bounce, waits for Egypt

 

 

U.S. wheat futures are poised to start stronger Tuesday on spillover support from neighboring markets, with traders waiting for the results of an Egyptian tender.

 

Chicago Board of Trade December wheat is called to open 2-3 cents per bushel higher. In overnight electronic trading, CBOT December wheat gained 2 3/4 cents to US$4.56 3/4.

 

CBOT December wheat bounced overnight after hitting a new contract low of US$4.50, below the previous low of US$4.51. Strength in neighboring CBOT corn lent some strength to wheat as corn and soybeans are getting nervous about the potential for cold weather next week, a trader said.

 

Traders are waiting to see what Egypt, known as a price conscious buyer, books in a tender. It will likely buy wheat from Europe or the Black Sea and may bypass the U.S. because it does not look price competitive, a CBOT trader said.

 

There is heavy competition for export business on the world market because world supplies are large. In other export news, Japan said it was seeking 117,000 tonnes of wheat, including 75,000 tonnes from the U.S., in a routine tender to be concluded Thursday.

"There's a lot of wheat around," a trader said. "The world knows it."

 

The Australian Bureau of Agricultural & Resource Economics, or Abare, increased its production forecast for the country's 2009-10 wheat crop to 22.7 million tonnes from 22 million tonnes in June. If realized, output will be up 6.1% from last year.

 

Industry participants agree more rain is needed to achieve current production estimates. Some rain may fall over New South Wales and Queensland next Tuesday and Wednesday, but the forecast is uncertain, according to private weather firm DTN Meteorlogix.

 

Traders have been keeping an eye on Australia amid worries that El Nino could cause an unfavorable drought during the key growing months of September and October. However, Australia does not need to produce a blockbuster crop this year because global supplies are already comfortable, analysts said.

 

In the U.S., 69% of spring wheat was cut as of Sunday, compared to 91% last year and the five-year average is 92%, according to the U.S. Department of Agriculture. Harvest in the northern U.S. Plains will benefit from mostly above normal temperatures and little rainfall during the next seven days, according to Meteorlogix. Cutting is behind schedule after the crop was planted late in the spring.

 

In the central and southern Plains, episodes of scattered thunderstorms will help replenish soil moisture for early growth of winter wheat, Meteorlogix said. The USDA said 13% of U.S. winter wheat was planted as of Sunday, the same as the five-year average and up from 9% last year.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.25, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.00, he said.

 

First resistance is seen at Monday's high of US$4.62 1/4 and then last week's high of US$4.75 3/4, the analyst said. First support lies at the contract low of US$4.51 and then at US$4.40, he said.