July 22, 2008


US Wheat Outlook on Tuesday: Seen 2-4 cents higher on rebound, spillover



U.S. wheat futures are poised to start Tuesday's day session higher on ideas the markets are due for a bounce after recent sell-offs, although improving crop conditions could keep a lid on gains.


Chicago Board of Trade September wheat is called to open 2 to 4 cents per bushel higher. In overnight electronic trading, CBOT September wheat rose 3 3/4 cents to US$7.94 3/4, while CBOT December wheat jumped 3 1/4 cents to US$8.18.


Wheat could feel spillover strength from rebounds in CBOT corn and soybeans, which also were firmer overnight in a turnaround from recent losses, traders said. The markets are technically oversold, they said.


"It's Turnaround Tuesday," a CBOT floor trader said.


An improvement in the condition of the U.S. spring wheat crop was a bit of a surprise and could weigh on Minneapolis Grain Exchange wheat, an analyst said. The U.S. Department of Agriculture said in its weekly crop progress report, issued Monday, that 63% of the crop was in good to excellent shape as of Sunday, up from 61% the previous week.


Hot, dry weather lowered crop ratings in the previous two progress reports. Periodic shower activity and "not very hot weather" will favor wheat through central and eastern areas of the northern Plains in the near-term, DTN Meteorlogix said.


"It looks like conditions might be getting a little better up in the northern Plains," a CBOT floor analyst said.


Concerns about the outlook for an Australian wheat crop also have eased in the past week, GrainCorp Ltd. said. Many parched areas in Western Australia's wheat belt received more than 15 millimeters of rain in the week ended early Tuesday.


Wheat areas of West Australia can expect more shower activity during the next few days, continuing to improve conditions after the June dryness, Meteorlogix said. Some rain may also reach the wheat belt of the southeast Queensland area, the private weather firm said.


In other news, the USDA said 71% of the U.S. winter wheat crop was harvested, up from 62% last week but below the five-year average of 79%. With nearly 3/4 of the crop cut, harvest pressure should become "less of a focus, with the demand phase to capture much of the trade's attention as time advances," Allendale said in a market comment.


Japan, meanwhile, said it bought 66,000 metric tonnes of wheat, including 41,000 tonnes of U.S. wheat, in a routine tender concluded Tuesday. The shipment is expected to arrive in October.


The next downside price objective for the bears is pushing and closing prices 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 Monday's high of US$8.26 1/2 and then at US$8.40. First support lies at Monday's low of US$8.11 and then at US$8.00.

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