July 23, 2008
US Wheat Outlook on Wednesday: Seen weaker on spillover, setback
Spillover pressure from weakness in other markets is expected to pressure U.S. wheat futures at the start of Wednesday's day session, with the markets seen erasing Tuesday's gains.
Chicago Board of Trade September wheat is called to open 10 to 12 cents per bushel lower. In overnight electronic trading, CBOT September wheat dropped 12 1/2 cents to US$7.84 1/4, while CBOT December wheat lost 12 3/4 cents to US$8.07.
Sharp losses in CBOT corn and soybeans overnight should be a bearish influence on wheat, traders said. Wheat has been looking to the row crops for direction lately, with corn and wheat linked because both are used for animal feed.
Continuing liquidation in crude oil is weighing on the grains, traders said. Strength in the U.S. dollar index also is considered bearish, as it gives foreign importers less buying powers, they said.
Wheat "futures appear unable to gain traction while corn and beans are suffering heavy losses," said Bryce Knorr, senior editor for Farm Futures.
CBOT December wheat Tuesday closed firmer and nearer the session high on technical buying. But bears still have the near-term technical advantage, a technical analyst said.
The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$8.00, the analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$8.70, he said.
First resistance is seen at this week's high of US$8.26 1/2 and then at US$8.40. First support lies at Tuesday's low of US$8.10 1/4 and then at US$8.00.
The unwinding of short wheat/long corn spreads could continue to lend some strength to wheat, an analyst said.
In demand news, Jordan said it bought 100,000 metric tonnes of wheat, of any origin, on a cost and freight basis. Japan, meanwhile, is seeking 57,000 metric tonnes feed wheat and 335,000 tonnes feed barley in a simultaneous buy-sell, or SBS, tender, in which the government matches the lowest offer price of the overseas sellers with the highest bid price of the domestic buyers.
Weather continues to look mostly benign around the world, traders said. Periodic shower activity and moderate weather will favor spring wheat through central and eastern areas of the U.S. northern Plains, DTN Meteorlogix said.
"Rain is moving across the Dakotas this morning, giving a lift to the spring wheat crop, though areas to the west remain mostly dry," Knorr said.
A significant trough over northeast Australia will bring rain to eastern Queensland again today, and some may reach the wheat belt of the southeast Queensland area, Meteorlogix said. Wheat areas of West Australia can expect more shower activity during the next few days, continuing to improve after the June dryness, according to the private weather firm.
In Argentina, major wheat areas of La Pampa and southwest Buenos Aires are still in need of rain to recharge soil moisture for spring growth, Meteorlogix said.