August 4, 2008


US Wheat Outlook on Monday: Seen 2-4 cents lower on spillover selling



U.S. wheat futures are poised to start Monday's day session weaker, as the markets follow corn and soybeans into negative territory.


Chicago Board of Trade September wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT September wheat slipped 2 1/4 cents to US$7.91 3/4.


Spillover selling from losses in CBOT corn and soybeans should weigh on wheat amid a lack of fresh news from the weekend, an analyst said. Bearish expectations for a record global wheat crop are still hanging over the markets, he said.


However, strong recent export demand continues to underpin U.S. wheat, traders said. The U.S. is seeing solid export sales because importing countries are rebuilding their wheat ending stocks after supplies dwindled last marketing year, an analyst said.


Buyers were active last week out of North Africa, with sales to Egypt showing up in the weekly U.S. export sales report, the analyst said. U.S. wheat export sales for the week ended July 24 were 726,400 tonnes, above trade estimates.


"Wheat should follow corn and soybeans lower on the open today, but buyers may be willing to step in on breaks," Farm Futures said in a market comment. "Though wheat prices continue to struggle on rallies, bears haven't been able to break the market either, despite heavy losses in the other crops."


Above normal temperatures and below normal rainfall maintain stress on filling spring wheat in eastern Montana and western North Dakota, DTN Meteorlogix said in a forecast. Generally favorable crop conditions are seen elsewhere in the U.S. northern Plains, the private weather firm said.


Conditions also are generally favorable for spring wheat on the Canadian prairies, Meteorlogix said. However, crop development is behind normal in most areas, which is "a concern if an early freeze occurs during the latter half of August," the firm said.

In the Southern Hemisphere, weekend showers were mostly less than 0.50 inch in Argentine wheat areas. More rain would benefit crop planting, emergence and development.


Showers during the weekend in Australia were mostly confined to extreme southeast areas, and any chance for moisture this week should be in the southeast, Meteorlogix said. Conditions "mostly favor wheat" Down Under, according to the firm.


Global wheat prices are holding firm as a result of quality issues in the Northern Hemisphere, the general manager of Australian exporter AWB Ltd. said. Wheat "continues to deteriorate in the Ukraine and there is some concern regarding quality with the Russian wheat harvest," he said.


CBOT December wheat prices closed higher and near mid-range. But bears still have the near-term technical advantage, a technical analyst said, and a five-week-old downtrend remains in place on the daily bar chart.


The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at the July low of US$7.98, the analyst said. The bulls' next upside price objective is to push and close December futures prices above solid technical resistance at last week's high of US$8.55, he said.


First resistance is seen at US$8.25 and then at Friday's high of US$8.35. First support lies at Friday's low of US$8.06 3/4 and then at US$7.98.


Wheat prices in China's major producing areas were mostly unchanged in the week to Monday as many reserve warehouses have completed their planned purchases. Wheat prices in Zhoukou in major producer Henan province were around RMB1,640 a metric tonne, stable from a week ago.

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