July 21, 2008


US Wheat Outlook on Monday: 3-5 cents lower on follow-through, spillover



U.S. wheat futures are expected to start Monday's day session on the defensive amid follow-through selling from the overnight and spillover pressure from corn.


Benchmark Chicago Board of Trade September wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT September wheat fell 4 3/4 cents to US$7.99 1/4, and CBOT December wheat dropped 2 cents to US$8.26 1/2.


The markets are expected to pull back amid a lack of fresh news and ideas that U.S. wheat needs to be more competitively priced to win export business, a CBOT trader said. Wheat out of the Black Sea region is cheaper than U.S. wheat.


Liffe November Paris milling wheat Monday also slipped to a seven-week-low of EUR187/tonne on spillover from CBOT weakness and European harvest progress. A Paris-based broker estimated French milling wheat harvest was about 20% done.


Weakness in CBOT corn should add to the bearish for wheat futures, traders said. However, the grain markets could see a two-sided trade after sell-offs last week, a trader said.


CBOT December wheat Friday closed lower, near the session low, hit a fresh five-week low and closed at a bearish weekly low close, a technical analyst said. Bears have the near-term technical advantage, and a three-week-old downtrend is in place on the daily bar chart, he said.


The next downside price objective for the bears is pushing and closing prices below solid technical support at US$8.00, the 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 US$8.30 and then at US$8.50. First support lies at US$8.11 and then at US$8.00.


The U.S. Department of Agriculture's weekly crop progress report, due out at 4 p.m. EDT., is expected to show the U.S. winter wheat harvest continued at a good clip last week. There is "an improving weather pattern for the final harvest effort in the Plains," DTN Meteorlogix said.


The crop progress report also could show another decline in spring wheat conditions due to a lack of rain, traders said. Periodic shower activity and "not very hot weather" will favor wheat through central and eastern areas of the U.S. northern Plains, Meteorlogix said, but Montana's crop areas will come under increasing stress from heat and dryness.


In Argentina, there is a chance for some rain through north and eastern wheat areas during the next day or two, although major wheat areas of La Pampa and southwest Buenos Aires should see only a few light showers from this system, Meteorlogix said. Argentina's wheat crop was growing fast after a week of exceptionally warm weather, but continued dry weather in the Cordoba and Santa Fe provinces could spur some farmers to plant early corn instead, the Agriculture Secretariat said in its weekly crop report.


Showers through Australia's west and southeast wheat areas during the weekend, meanwhile, should help recharge soil moisture for spring growth of wheat, Meteorlogix said.

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