July 16, 2008

 

US Wheat Outlook on Wednesday: Seen down on spillover, harvest progress

 

 

Spillover pressure and ideas that the global wheat crop looks strong are expected to press down U.S. wheat futures at the start of Wednesday's day session.

 

Chicago Board of Trade September wheat is called to open 4 to 8 cents per bushel lower. In overnight electronic trading, CBOT September wheat fell 7 1/4 cents to 8.03 3/4, and CBOT December wheat was down 6 3/4 cents to US$8.28.

 

Weakness in the neighboring CBOT corn and soy markets should be a bearish influence on wheat, along with setbacks in outside markets like crude oil, an analyst said. Wheat also is under pressure from the advancing global wheat harvest and expectations for a record world crop in 2008-09, he said.

 

Harvest is nearly complete in U.S. southern Plains states like Kansas, Oklahoma and Texas. The harvest is ramping up in Europe.

 

"Wheat faces stiff competition in export markets as harvest in the northern hemisphere advances," an analyst said.

 

Australia received a drink of "much needed rain" through important wheat areas of West Australia, DTN Meteorlogix said. The crop needed moisture after a fairly dry June, and there will likely be more rain in the region by Friday or Saturday, the private weather firm said.

 

Argentina saw "unusually warm" temperatures Tuesday, with highs reaching the 70s and 80s Fahrenheit, up from normal temperatures of 57 to 63 degrees, according to Meteorlogix. There is a chance for cooler conditions and some rain this weekend, which would be more favorable for wheat, the firm said.

 

"Most wheat crops around the world look good," Country Hedging said in a market comment.

 

In the U.S., an active jet stream continues to bring thunderstorms through spring wheat areas of the U.S. northern Plains, particularly in central and eastern areas, Meteorlogix said. Conditions are "mostly favorable" for the crop, except possibly in dry central Montana, the private weather firm said.

 

Heat and dryness have hurt spring wheat lately and prompted the government to lower its crop condition ratings. Canada also grows spring wheat, and favorable thunderstorms have been reported in important crop areas, Meteorlogix said.

 

Looking at technical charts, CBOT September wheat hit a session low Tuesday of US$8.05, its lowest price since June 9, but "gap support is still in place at US$8.02," according to a research note from Futures Techs. If US$8.02 breaks, then US$7.80, US$7.55 and US$746.40 are the next targets, the firm said.

 

The next downside price objective for bears is pushing and closing CBOT December wheat below solid technical support at US$8.00, a technical analyst said. The bulls' next upside price objective is to push and close December futures prices above solid technical resistance at US$8.70, he said.

 

First resistance is seen at Tuesday's high of US$8.53 and then at US$8.70. First support lies at Tuesday's low of US$8.30 and then at US$8.25.

 

"Bears are gaining downside technical momentum," the technical analyst said.

 

In other news, Syria's state-owned General Establishment for Cereal Processing and Trade said it was tendering to sell 50,000 metric tonnes of durum wheat and buy 120,000 tonnes of optional origin soft wheat. India, meanwhile, is likely to sell up to 6 million metric tonnes of wheat by March in some local markets in order to cool prices, the federal farm minister said.