July 15, 2008

 

US Wheat Outlook on Tuesday: Seen 6-8 cents higher on overnight trend

 

 

U.S. wheat futures are poised to start Tuesday's day session higher on follow-through buying from the overnight, with traders keeping an eye on deteriorating spring wheat conditions and shrugging off an Egyptian purchase of optional origin wheat.

 

Chicago Board of Trade September wheat is called to open 6 to 8 cents per bushel higher. In overnight electronic trading, CBOT September wheat jumped 8 cents to US$8.26 per bushel, and CBOT December wheat rose 8 1/4 cents to US$8.50 1/2.

 

Wheat is seen rebounding a bit after stumbling Monday. Strength in CBOT corn and weakness in the U.S. dollar index should be supportive, traders said.

 

A sharp decline in the U.S. Department of Agriculture's good-to-excellent rating for spring wheat was surprising and could boost Minneapolis Grain Exchange wheat, traders said. The agency rated 61% of the spring wheat crop as good-to-excellent as of Sunday, down eight percentage points from the previous week, amid reports of unfavorable dryness in parts of the northern Plains.

 

DTN Meteorlogix calls for an active jet stream to lead to episodes of thunderstorms in the northern Plains, especially in central and eastern areas. Conditions for spring wheat are seen as "mostly favorable," the private weather firm said.

 

There are concerns about the size of the spring wheat crop because the USDA's production estimate, issued Friday, was below expectations. The agency pegged 2008-09 spring wheat production at 507 million bushels, compared to the average analyst estimate of 537 million and 2007-08 production of 479 million.

 

Spring wheat, prized for its high protein content, also is grown in Canada. Showers are expected during the next 24 to 48 hours on the Canadian Prairies, which is favorable for spring wheat, Meteorlogix said.

 

In other news, Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, or GASC, said Tuesday it bought 240,000 metric tonnes of optional origin wheat in a tender. Of the total, 120,000 tonnes will be Russian, Ukraine or U.S. soft red wheat, and 120,000 tonnes will be Russian, Ukraine, U.S. soft red wheat or Canadian soft wheat.

 

The purchase was not "shocking" because the wheat is in store, and the news shouldn't give the markets a big boost, a CBOT floor trader said. The wheat is for delivery from Sept. 1-15.

 

Japan, meanwhile, said it is seeking 76,000 metric tonnes of wheat, including 30,000 tonnes from the U.S., in a routine tender to be concluded Thursday. The wheat is expected to arrive in October.

 

The bulls' next upside price objective is to push and close CBOT December wheat above solid technical resistance at US$9.00, 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 Monday's high of US$8.57 3/4 and then at US$8.66 3/4. First support lies at last week's low of US$8.36 and then at US$8.25.
   

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