June 6, 2006

 

US Wheat Outlook on Tuesday: Down 2-3 cents on follow-through, harvest

 

 

U.S. wheat futures were called to open down 2-3 cents Tuesday on follow-through sales, U.S. harvest weakness and expectations for a weak Chicago Board of Trade corn and soybean open because of favorable U.S. Midwest crop conditions, brokers said.

 

Expected losses in gold futures should also weigh on U.S. wheat futures, they noted.

 

Still, sales of Minneapolis Grain Exchange spring wheat futures may be limited Tuesday after the U.S. Department of Agriculture reported Monday that the spring wheat crop was 69% in good-to-excellent shape, down 4 percentage points from last week's 73% in that condition.

 

That call could also be hedged, however, as Montana and the Dakotas have received some rains, which should have aided those crops, sources said.

 

The USDA noted that the U.S. winter wheat crop was 9% harvested as of Sunday, up from last year's 3% and the five-year average of 5%.

 

Twenty-seven percent of the nation's winter wheat crop was in good-to-excellent condition, down 1 percentage point from last week's rating of 28% in that shape. Traders and analysts had expected a slight decline.

 

The U.S. wheat crop ratings are drawing less attention with farmers harvesting crops, Shawn McCambridge, a grain analyst at Prudential Financial, told Dow Jones Newswires late Monday.

 

Instead, traders are beginning to focus on emerging field reports, particularly from top U.S. winter wheat grower Kansas.

 

The U.S. winter wheat crop was 88% headed as of Sunday, up from last year's 86% headed at this time.

 

In the overnight e-CBOT session, most-active CBOT July wheat closed down 2 3/4 cents at US$3.95 3/4 per bushel.

 

"It still appears a market top is in place," a technical source said. "The next downside price objective for the bears is solid technical support at the last week's low of US$3.89. It will take a close back above resistance at US$4.11 to provide the bulls with fresh upside technical momentum."

 

First resistance for CBOT July wheat was seen at US$4.00 and then at US$4.07 - Monday's high. First support lies at US$3.98 - Monday's low - and then at US$3.95.

 

Kansas City Board of Trade July wheat ended overnight down 3 3/4 cents at US$4.91 3/4 per bushel.

 

"A close below support at last week's low of US$4.80 would provide the bears with some fresh downside technical momentum," the technical source said. "It will take a close back above major psychological resistance at US$5.00 a bushel to revive the bulls. First resistance is seen at US$5.00 and then at US$5.05."

 

First support for KCBT July wheat was seen at US$4.91 - Monday's low - and then at US$4.88.

 

Cash U.S. hard red winter wheat basis bids were mostly steady to slightly weaker in two locations Tuesday; and soft red winter wheat basis bids were mostly weaker amid the building harvest, with an 8-cent loss in St. Louis and a 4-cent loss in Louisville. Still, sources in Kansas City reported SRW wheat truck basis bids rose 7 cents.

 

U.S. spring wheat basis bids were mixed Tuesday, grain merchandisers said.

 

In wheat export news, Taiwan bought 70,470 metric tonnes of U.S. No. 1 wheat from trading house Toepfer in a tender concluded Tuesday.

 

Japan sought 70,000 tonnes of U.S. wheat in an overall tender to be concluded Thursday totaling 106,000 metric tonnes for Aug. 1-31 shipment, sources said.

 

U.S. wheat traders continue to eye planting reports from Australia and Argentina amid dry weather in both countries' wheat belts.