November 20, 2007

 

US Wheat Outlook on Tuesday: 2-4 cents lower following overnight weakness

 

 

U.S. wheat futures are predicted to begin trading 2 to 4 cents lower Tuesday, following the weaker tone in overnight trade with little fresh fundamental news to influence market direction, an analyst said.

 

In overnight electronic trading, CBOT March wheat fell 4 cents to US$7.74 per bushel while March KCBT hard red wheat declined 6 1/4 cents to US$7.89 3/4.

 

The market should be lower on the lack of fresh news and the overnight weakness, an analyst said. The strength in the outside markets may provide some support and the dollar is weaker which might limit the losses, the analyst added. Talk that Russia might revise its export tax in January is also a modest positive for the market, the analyst said.

 

Monday's weekly crop conditions report noted that overall conditions continue to decline compared to the previous week as well as a year ago. The U.S. Department of Agriculture reported that 45% of the U.S. winter wheat crop was in good-to-excellent condition, down four percentage points from last week and 12 percentage points lower than a year ago. In Kansas, 40% of the crop was in good-to-excellent condition, down 9 percentage points from last week. In soft red winter wheat producer Ohio, 87% of the crop was rated in good-to-excellent condition, unchanged from a week ago.

 

Emergence of the crop remains below last year. Eighty-five percent of the crop has emerged, compared to 90% in 2006 and the average of 90%. In Oklahoma, 79% of the crop has emerged, versus 89% in 2006 and the five-year average of 93%.

 

Although crop ratings are weaker than last week and last year, it won't have much impact on prices as the crop heads into dormancy, though the situation bears watching, a trader said.

 

In the U.S. hard red winter wheat belt, dry weather with only a few showers is forecast for Wednesday and Thursday, DTN Meteorlogix Weather said. Light-to-locally moderate precipitation is possible through southern areas Friday and into Saturday. Temperatures are expected to average below normal in the period, Meteorlogix Weather said.

 

In the 6- to 10-day outlook temperatures are expected to average near normal and precipitation near-to-below normal.

 

On daily open auction technical charts, CBOT March wheat settled higher and near mid-range Monday, though near-term chart damage has the bears holding downside technical momentum, a technical analyst said. The bull's next major upside price objective remains closing prices above major psychological resistance at US$8.00 per bushel. The next downside price objective is to close prices below last week's low of US$7.63 per bushel.

 

First resistance is seen at US$7.83 1/2, Monday's high and then at US$7.93. First support is at US$7.74 and then at US$7.63.

 

March KCBT wheat settled near session highs Monday in quiet trade. The bulls' next upside price objective is closing prices above solid resistance at US$8.20 per bushel. The bears' next downside price objective is closing prices below the recent low of US$7.69 per bushel.

 

First resistance is seen at US$8.01, and then at US$8.10. First support is seen at US$7.90 1/2 and then at US$7.80.

 

In other wheat news, Japan bought 90,000 metric tonnes of U.S. wheat in a tender concluded Tuesday.