July 11, 2008

 

US Wheat Outlook on Friday: Seen mixed on spillover, USDA data

 

 

U.S. wheat futures are expected to start Friday's day session steady/mixed on spillover support from other markets and bearish government estimates for increased production, floor traders said.

 

In overnight electronic trading, Chicago Board of Trade September wheat was up 2 3/4 cents at US$8.20 3/4 per bushel. CBOT December wheat was up 3 cents at US$8.45 1/4.

 

CBOT corn and soybeans are expected to open higher after the U.S. Department of Agriculture issued crop reports amid strength in outside markets, such as crude oil and gold, traders said. Wheat, which has been following corn lately, should feel some borrowed strength, they said.

 

The USDA pegged 2008-09 U.S. all wheat production at 2.461 billion bushels, which was slightly below the average of analysts' pre-report estimate of 2.478 billion. Still, there are "ample wheat supplies," said Mike Zuzolo, analyst for Risk Management Commodities.

 

The USDA's forecast for soft red winter wheat production of 607 million bushels topped the highest estimate is a pre-report survey of analysts. The average of analysts' pre-report estimates was 592 million, up from the USDA's June estimate of 572 million, and the highest pre-report estimate was 604 million.

 

Hard red winter wheat production also exceeded expectations. The government pegged the crop at 1.040 billion bushels, compared to the average pre-report estimate of 1.037 billion and the USDA's June estimate of 1.030 billion.

 

"HRW wheat yields have been better than expected, almost across the board," said Louise Gartner, analyst for Spectrum Commodities.

 

Local strong storms may cause hard red winter wheat harvest delays or disruptions in the U.S. central and southern Plains, but many areas will continue to harvest with only minor delays, DTN Meteorlogix said. The USDA will issue an update on harvest progress Monday in its weekly crop progress report.

 

A lower-than-expected estimate for spring wheat production was a surprise and could lend support to Minneapolis Grain Exchange wheat futures, a CBOT floor trader said. The USDA pegged spring wheat production at 507 million, compared to the average analyst estimate of 537 million and the lowest pre-report guess of 525 million.

 

Spring wheat in the northern Plains "is mostly in good to excellent condition at this time, but the condition has declined somewhat during the past week," Meteorlogix said. Central Montana's wheat area appears drier and somewhat hotter than most of the balance of the belt, the weather firm said.

 

The USDA raised its production forecast for Australia's wheat crop by 1 million metric tonnes from last month, despite market jitters about dryness Down Under. The increase was based on "increased area in the latest government estimates," the USDA said.

 

The USDA estimated 2008-09 U.S. wheat carryout at 537 million bushels, in line with analysts' expectations. Stocks should continue to rebuild due to increased production, traders said.

 

Bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at this week's high of US$9.05, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.00, he said.

 

First resistance is seen at Thursday's high of US$8.55 3/4 and then at US$8.66 3/4. First support lies at this week's low of US$8.36 and then at US$8.25.
   

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