June 30, 2008


US Wheat Outlook on Monday: Down 2-5 cents on spillover pressure after USDA



U.S. wheat futures are poised to start Monday's day session lower on spillover weakness after the government issued a crop report that's being construed as bearish.


Chicago Board of Trade September wheat is called to open 2 to 5 cents per bushel lower, traders said. In overnight electronic trading, CBOT September wheat rose 4 1/4 cents to US$9.16 1/4. CBOT December wheat rose 2 3/4 cents to US$9.38 1/4.


The grain markets are expected to come under pressure from the U.S. Department of Agriculture's June acreage and quarterly stocks reports. Traders were expecting the report to be supportive, but planted corn acres and corn stocks as of June 1 were above the average of analysts' estimates.


Wheat has been following corn lately and should continue to take direction from the neighboring market, analysts said. Wheat acreage data was seen as unsurprising, while wheat stocks as of June 1 were above the average trade estimate.


The USDA said quarterly wheat stocks were 306 million bushels, topping the average pre-report estimate of 278 million. Ending stocks were expected to rise due to expanded global wheat seedings and increased competition for export business.


"We're higher on the ending stocks," said Shawn McCambridge, analyst for Prudential Bache, "but that's kind of an old-news type thing. On the acreage numbers, everything was pretty close to expectations. Nothing really jumps out at me on the wheat to speak of, except that we did add a little more on ending stocks."


End-of-the-month profit-taking could add more pressure to wheat, traders said. The markets closed mostly lower Friday on profit-taking and the advancing U.S. wheat harvest.


Harvest resumed Sunday in scattered areas of Kansas after recent delays due to wet weather, according to a report from Kansas Wheat, a producers' group. The USDA will update its estimate on harvest progress in the weekly crop progress report due out at 4 p.m. EDT.


A few days of drier weather in the central and southern Plains will help improve conditions for the mature wheat and the wheat harvest, DTN Meteorlogix said. However, there may be an increase in thunderstorm activity again later in this week, the private weather firm said.


In Australia, where dryness has been a concern, scattered showers fell through the West Australia wheat belt during the weekend. Rainfall this week looks to be limited to central and eastern Victoria, and it should be mostly light, Meteorlogix said.


The bulls' next upside price objective is to push and close CBOT December wheat above major psychological resistance at US$10.00, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$9.00, he said.


First resistance is seen at US$9.50 and then at Friday's high of US$9.83. First support lies at Friday's low of US$9.28 1/4 and then at US$9.12.

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