July 1, 2008
US Wheat Outlook on Tuesday: 3-5 cents lower on weak CBOT corn, harvest
Weak Chicago Board of Trade corn futures and harvest pressure are expected to push U.S. wheat futures lower at the start of Tuesday's day session, with traders waiting to see the results of an Egyptian tender.
CBOT September wheat is called to open lower by 3 to 5 cents per bushel. In overnight electronic trading, CBOT September wheat fell 3 cents to US$8.40 1/2 per bushel, while CBOT December wheat slipped 1 3/4 cents to US$8.57.
A setback in CBOT corn is seen as a bearish influence on wheat. However, inter-market spreading could help buoy wheat if traders buy wheat and sell corn, a CBOT floor trader said.
Wheat ended Monday deep in negative territory, and it suffered some technical damage as corn sank its 30-cent daily limit. CBOT December wheat suffered near-term chart damage "as an uptrend line from the late-May low has been penetrated on the downside and negated," a technical analyst said.
"The bears do have fresh downside technical momentum on their side," he said.
The bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at US$9.50, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.50, he said.
First resistance is seen at US$9.00 and then at US$9.25. First support lies at Monday's low of US$8.77 1/4 and then at US$8.50.
The U.S. winter wheat harvest is "in full swing and hedging pressure is at its worst," said Dennis Gartman, publisher of the advisory newsletter The Gartman Letter. The crop was 36% cut as of Sunday, compared to 36% last year and the average of 48%, the U.S. Department of Agriculture said in its weekly progress report.
Rains have delayed harvest in the southern Plains this season, and showers could continue to slow cutting in northern and eastern areas during the next few days, DTN Meteorlogix said in a forecast. Southern and east-central areas of the Midwest, meanwhile, could also be hit with moisture, the private weather firm said.
In the northern Plains, western areas look to be drier and hotter during this week, reducing available soil moisture for spring wheat and increasing stress to this crop, Meteorlogix said. The eastern areas will see more variable temperatures, with some shower activity possible in North Dakota and northern Minnesota, the firm said.
The USDA raised its good-to-excellent rating of U.S. spring wheat by 2 percentage points to 74%. The crop was 28% headed, below the average of 47%.
Traders are waiting to see how much wheat Egypt's state-owned General Authority for Supply Commodities buys after announcing a tender Monday after the close of trading. Bids for U.S. wheat are looking more competitive than in recent tenders, but the Black Sea region has an advantage regarding freight costs, a trader said.
In other news, Japan is seeking 202,000 tonnes of wheat, including 81,000 tonnes of U.S. wheat, in a routine tender to be concluded Thursday. The shipment is expected to arrive in October.