July 14, 2008

 

US Wheat Outlook on Monday: 10-15 cents down on weak corn, harvest pressure

 

 

U.S. wheat futures are expected to start Monday's day session lower on spillover pressure from weak Chicago Board of Trade corn and anticipation of a big crop coming online.

 

CBOT September wheat is called to open 10 to 15 cents per bushel lower. In overnight electronic trading, CBOT September wheat tumbled 12 1/2 cents to US$8.18 1/4, and CBOT December wheat fell 13 cents to US$8.42.

 

Wheat should follow CBOT corn and soybeans to the downside, traders said. Wheat appears ready to give back gains made Friday on technical buying and short-covering, a CBOT floor trader said.

 

The wheat markets are expecting a strong U.S. winter wheat harvest following the release of increased production estimates from the U.S. Department of Agriculture on Friday. The 2008-09 winter wheat crop was pegged at 1.864 billion bushels, up from the USDA's June estimate of 1.817 billion and 2007 production of 1.516 billion.

 

Harvest pressure should weigh on the markets, as weather looks mostly favorable in the Midwest and Plains, a trader said. There has been chatter recently about delays in the Midwest soft red winter wheat harvest due to wet weather, although it would not be a big deal to lose some bushels because the crop is big, he said.

 

Some hot weather is expected to enter the Midwest region from the west this week, according to a forecast from DTN Meteorlogix. In the central and southern Plains, there could be "some disruptions to the remaining harvest but nothing major," the private weather firm said.

 

In spring wheat areas of the northern Plains, where dryness has shaved some bushels off yields, an active jet stream is leading to episodes of thunderstorms, especially for central and east areas, Meteorlogix said. Conditions are "mostly favorable" for wheat, the firm said.

 

The USDA will issue its weekly crop progress report at 4 p.m. EDT. The report will include updates on winter wheat harvest progress and on spring wheat condition ratings.

 

Traders are keeping an eye on the spring wheat crop because the USDA's production estimate was below the average of analysts' estimates. The agency pegged production of spring wheat other than durum at 507 million bushels, while analysts' were expecting a number closer to 537 million.

 

The bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at last 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 Friday's high of US$8.70 and then at US$8.83 1/2. First support lies at US$8.50 and then at last week's low of US$8.36.

 

Nearby CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange July wheat will have their final settlement Monday.

 

In other news, Jordan said it was tendering to buy 100,000 metric tonnes of wheat, of any origin, on a cost and freight basis, with bids due by July 23. Of the total, 50,000 tonnes are for shipment during the second half of September and 50,000 tonnes are for shipment during the first half of October.