July 2, 2008

 

US Wheat Outlook on Wednesday: Seen weaker on profit-taking, harvest

 

 

Profit-taking and forecasts for improved harvest weather in the U.S. Plains are expected to weigh on U.S. wheat futures at the start of Wednesday's day session, traders say.

 

Chicago Board of Trade September wheat is called to open 5 to 7 cents per bushel lower. In overnight electronic trading, CBOT September wheat shed 7 1/2 cents to US$8.57 1/4, and CBOT December wheat dropped 8 cents to US$8.80.

 

Overnight weakness in CBOT corn and soybeans could add pressure to wheat, but the row crops may trade both sides amid uncertainty about weather conditions in the Midwest, a CBOT floor analyst said. Traders also are reluctant to be short heading into the three-day July 4 weekend, he said.

 

In the Midwest, a new round of thunderstorms appears likely for southern and eastern areas during the next few days, according to DTN Meteorlogix. The wetness could cause some more delays for the soft red winter wheat harvest, which could add underlying support to prices, an analyst said.

 

But cutting conditions should improve in the central and southern Plains during the long weekend. The overall weather pattern in the region after Thursday "looks to be more favorable for the wheat harvest," Meteorlogix said.

 

"Forecasts for better weather for harvest on the Plains could keep the market under pressure, especially with pre-hedging ahead of the July 4th weekend," said Bryce Knorr, senior editor for Farm Futures.

 

In Australia, there appears to be "some promise of more important rain for the key wheat areas of South Australia, Victoria and New South Wales" from Sunday through Tuesday, Meteorlogix said. Rabobank Australia Ltd. on Wednesday maintained its forecast for Australia's new wheat crop at 20 million to 24 million metric tonnes but warned of a significant downside risk to production in the event of dry weather.

 

In other news, the state-run Grain Board of Iraq has issued a new tender to buy at least 50,000 tonnes of optional-origin wheat, the board said on its Web site. The board set the closing date for the new tender for July 13 and offers will be valid until July 17, it said.

 

Wheat export business has been "scarce" this week, Knorr said. Egypt on Tuesday bought wheat from the Black Sea and Canada but none from the U.S.

 

CBOT December wheat closed firmer and near mid-range Tuesday on short covering and some bargain-hunting buying after recent strong losses, a technical analyst said. Still, near-term chart damage has been inflicted recently.

 

"The bears still have downside technical momentum on their side," the analyst said. "I don't see much upside price potential in the wheat market."

 

Bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at this week's high of US$9.45, the analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.50.

 

First resistance is seen at US$9.00 and then at US$9.25. First support lies at Tuesday's low of US$8.77 and then at US$8.50.