July 7, 2008

 

US Wheat Outlook on Monday: Sharply lower on spillover, firm dollar

 

 

Follow-through selling from overnight losses and spillover pressure from weak neighboring markets are expected to push U.S. wheat futures sharply lower at the start of Monday's day session.

 

Chicago Board of Trade September wheat is called to open 20 to 25 cents per bushel lower. In overnight electronic trading, CBOT September wheat sank 25 3/4 cents to US$8.61 3/4.

 

CBOT corn overnight fell its daily, exchange-imposed limit of 30 cents, and soybeans were sharply lower. If corn locks limit down during the day session, it will drag wheat with it, a CBOT floor trader said.

 

A stronger U.S. dollar index should weigh on the grains, as it gives foreign importers less buying power. The advancing U.S. winter wheat harvest is seen as another bearish factor for the markets because new supplies are coming online.

 

Local harvest delays may continue in parts of the U.S. central and southern Plains early this week due to scattered thundershowers, DTN Meteorlogix said. Conditions for the harvest may improve somewhat later in the week, the private weather firm said.

 

"Cooperative weather allowed much of the state to proceed with wheat harvest over the Fourth of July weekend," said Kansas Wheat, a producers' group, in a report. "At this point, southern Kansas is all but finished, with northwest Kansas getting over the halfway mark."

 

In the U.S. northern Plains, spring wheat is mostly in good-to-excellent condition. Central Montana's wheat area appears drier and somewhat hotter than most of the rest of the spring wheat belt this week, Meteorlogix said.

 

Australia's crop received 0.10 to 0.60 inch of moisture through southeast South Australia, Victoria and southern New South Wales late during the weekend, according to Meteorlogix. Showers could move northward through New South Wales on Monday, the weather firm said.

 

The first level of "bold support" for CBOT September wheat is last week's low of US$8.54, according to Futures Techs. Below that level, the market will target gaps around US$8.27 1/2 and US$8.02, the firm said.

 

A CBOT floor trader, meanwhile, said a key level of support was around US$8.60. The contract slipped below that price overnight before trimming losses and ending at US$8.61 3/4.

 

CBOT December wheat edged higher for a third session in a row on Thursday. The short-term technical tone has been mostly positive since the beginning of June, but the dominant longer-term trend is still bearish "in the wake of the mid March-late May price collapse," a technical analyst said.

 

Major resistance near term lies at the US$9.94 3/4 to US$10.00 mark, the analyst said. Bulls would need to conquer that ceiling to turn the intermediate term outlook positive and keep the recent uptrend alive, he said.

 

Bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at US$9.94 3/4, the analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.77, he said.

 

First resistance is seen at US$9.16 and then at US$9.45. First support lies at Thursday's low of US$8.93 1/2 and then at US$8.77.

 

In other news, the U.S. Department of Agriculture is slated to issue its weekly crop progress report at 4 p.m. EDT. The weekly export inspections report is due out at 11 a.m. EDT.

 

The Commodity Futures Trading Commission should issue its Commitments of Traders report at 4 p.m. EDT. The report was delayed from Friday by Independence Day.