May 22, 2007

 

US Wheat Outlook on Tuesday: 2-4 cents down in sympathy with CBOT corn, soy

 

 

U.S. wheat futures are expected to start Tuesday's day session lower in sympathy with losses in neighboring markets after the release of a bearish crop progress report, traders said.

 

Benchmark Chicago Board of Trade July wheat is called to open down 2 to 4 cents per bushel. In e-cbot trading, CBOT July wheat slipped 3 1/2 cents to US$4.76.

 

The U.S. Department of Agriculture's weekly crop progress report pressured prices in CBOT corn and soybeans overnight, while wheat followed, traders said. The story should remain the same during the day session, with wheat feeling spillover pressure from its neighbors, they added.

 

The report was bearish as it showed a solid pace for soybean planting and a higher-than-expected good-to-excellent corn condition rating, a CBOT floor analyst said.

 

For wheat, the report showed the condition of the winter crop improved slightly during the past week, although that was largely expected by the trade, analysts said. The USDA rated 59% of the winter crop in good-to-excellent condition as of May 20, up from 58% a week ago and well above the five-year average of 30%.

 

Producers have begun to harvest winter wheat in some southern states, including Texas and Oklahoma, and that will continue to be a source of seasonal price pressure, CBOT floor traders noted. Sixty-eight percent of the winter wheat crop was reported headed, matching the five-year average, according to the USDA.

 

For U.S. spring wheat, 81% of the crop was reported in good-to-excellent condition, compared to 79% last week and 76% a year ago. Traders had said they expected ratings to hold steady at last week's level, so the small increase may be seen as slightly negative, a trader said.

 

Planting also appears to be ahead of schedule, an analyst said. Ninety-five percent of the crop has been planted, compared to 89% last year and the five-year average of 86%, according to the USDA.

 

Seventy-four percent of the spring crop was reported emerged, compared to the five-year average of 60%.

 

"The wheat looks good, but the market's going to be focused more on what's going on in corn and soybeans today," an analyst said.

 

The bulls' next upside price objective is to close CBOT July wheat above solid resistance at US$5.00, a technical analyst said. The next downside price objective for the bears is closing prices below solid support at Monday's and last week's low of US$4.70 1/2.

 

First resistance is seen at Monday's high of US$4.81 and then at US$4.85. First support lies at US$4.75 and then at US$4.70 1/2.

 

At the Kansas City Board of Trade, bulls' next upside price objective is closing July prices above solid chart resistance at the May high of US$4.93. The bears' next downside objective is closing prices below solid support at last week's low of US$4.66 1/2.

 

First resistance is seen at Monday's high of US$4.75 and then at US$4.80. First support is seen at US$4.70 and then at US$4.66 1/2.

 

The U.S. Southern Plains are on track for wet weather, which is unfavorable to the developing and maturing crop and will increase disease issues, according to DTN Meteorlogix.

 

Thunderstorms overnight hit some previously dry areas of the western China Plain but have yet to hit important crop areas of Henan province, the weather firm said. However, this region does have a chance for rain during the next few days, Meteorlogix added.

 

In Australia, any shower activity in the drier areas of country is expected to be light during the next seven days. The Ukraine should see dry and hot weather increase stress to winter wheat, especially through the central and east Ukraine, Meteorlogix said.

 

The continuing lack of rain in Ukraine, with drought forecast to last at least until the end of May, may result in the loss of about 30% of this year's grain harvest, the head of the National Weather Centre's agro-meteorology department said Tuesday. The loss of 30% of the grain harvest, however, isn't likely to affect the domestic market as wheat harvest forecasts of about 17 million metric tonnes exceed domestic needs.

 

In other news, Egypt's state-owned Food Industries Holding Company, or FIHC, is tendering Tuesday for 30,000-55,000 metric tonnes of wheat, traders said. FIHC is looking to buy U.S. soft red wheat, or Australian, French, Russian, Kazakh, Ukrainian or Syrian wheat, a Cairo-based trader said.

 

Japan is seeking 130,000 metric tonnes of wheat in a routine tender to be concluded Thursday, an agriculture ministry official said Tuesday. The tender includes 45,000 tonnes of U.S. hard red winter wheat, 39,000 tonnes of U.S. dark northern spring wheat, and 6,000 tonnes of U.S. western white wheat.

 

India's State Trading Corp., meanwhile, has received seven bids offering ample volumes of more than the 1 million metric tonnes sought in its latest tender but at high prices in line with recent global trends, government and trade officials said Tuesday. The highest quote was about US$302 per tonne, a government official said.

 

The tender, issued on behalf of the federal government, closed Monday and the government has until May 30 to evaluate the bids.