October 16, 2007

 

US Wheat Outlook on Tuesday: 10-15 cents lower on long liquidation

 

 

Bearish technical momentum and a lack of fresh news are expected to drag U.S. wheat futures lower at the start of Tuesday's day session, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 10-15 cents per bushel lower. In e-cbot overnight trading, CBOT December wheat fell 14 cents to US$8.19 1/2, and CBOT July wheat ended down 4 cents at US$6.67.

 

There should be follow-through long liquidation from the overnight and from a sharply lower close Monday, traders said. It is "very worrisome" for bulls that wheat futures tumbled Monday amidst a general rally in commodities, including corn and soybeans, a technical analyst said.

 

Old crop/new crop bear spreading should continue to pressure nearby December wheat while lending support to July wheat, a CBOT floor trader said. The spread has become popular amid ideas that the old-crop December wheat has topped out, he added.

 

Traders also will likely continue to unwind some long wheat/short corn spreads, the CBOT floor trader said.

 

The bulls' next upside price objective is to push CBOT December wheat above resistance at last week's high of US$8.83, the technical analyst said. The next downside price objective for the bears is pushing prices below solid support at US$8.14. First resistance is seen at US$8.41 and then at US$8.50. First support lies at Monday's low of US$8.27 1/2 and then at US$8.14.

 

At the Kansas City Board of Trade, the bulls' next upside price objective is pushing December wheat above resistance at last week's high of US$8.72, the technical analyst said. The bears' next downside objective is pushing prices below support at US$8.18 3/4. First resistance is seen at US$8.50 and then at US$8.60. First support is seen at Monday's low of US$8.37 3/4 and then at US$8.25.

 

Shower activity in the U.S. central and southern Plains during the next five to seven days will maintain soil moisture for early growth of wheat, DTN Meteorlogix said. However, the southwest growing belt continues to be on the lower end of the rainfall forecasts, the private weather firm said.

 

The U.S. Department of Agriculture reported that 73% of the winter wheat crop was planted, below the 77% seeded in 2006 and the five-year average of 76%. Although seeding is behind schedule, planting deficits have "narrowed significantly" during the past week in the Plains, Farm Futures analyst Arlan Suderman said.

 

In Kansas, 71% of the wheat had been planted as of Sunday, compared to the average of 80%. In Oklahoma, 68% of the crop had been seeded, compared to the five-year average of 78%.

 

The USDA reported that 43% of the winter wheat crop has emerged, below the 48% in 2006 and the average of 51%.

 

"Dryness remains a concern over the southwestern Plains, but traders are more focused on chart damage done to the charts on Monday," Suderman said in a market comment. "Charts are driving price action right now with many traders afraid of being on the wrong side."

 

Dry weather in southeastern Australia continue to stress winter crops, including wheat, with only traces of rain near the country's southern coast, according to data from the government's Bureau of Meteorology for the 24 hours ended early Tuesday.

 

Australia's southeastern wheat areas may see light rainfall during the next seven days, Meteorlogix said. Otherwise, dry weather is expected to continue across the country's wheat areas.