August 8, 2008
US Wheat Outlook on Friday: 10 - 20 cents lower, setting back from rally


U.S. wheat futures are poised to start Friday's day session on the defensive as the markets pull back from sharp gains amid weakness in neighboring markets.


Chicago Board of Trade September wheat is called to open 10 to 20 cents per bushel lower. In overnight electronic trading, CBOT September wheat fell 16 1/4 cents to US$8.06, while CBOT December wheat sank 16 1/2 cents to US$8.30 1/2.


The markets are expected to give back some of their gains from Thursday, when nearby CBOT September wheat briefly soared the daily, exchange-imposed limit of 60 cents. The rally may be seen as a selling opportunity considering bearish projections for a record world wheat crop in 2008-09, an analyst said.


F.O. Licht raised its forecast for 2008-09 world wheat output to 657.6 million tonnes, up 2.6 million tonnes from its projection last month and well above its 2007-08 estimate of 604.2 million. Final wheat exports from the Black Sea region, an aggressive competitor for business on the world market, will be 23 million to 26 million tonnes, up sharply from 13 million tonnes last year due to increased plantings and favorable weather, F.O. Licht said.


U.S. wheat futures also could come under some pressure from weakness in CBOT corn and soybeans, as losses in the row crops have kept a lid on wheat in recent sessions, a trader said. Strength in the U.S. dollar index and weakness in crude oil are seen adding to the bearish tone for the grains, they said.


Wheat bulls regained some fresh upside technical momentum from Thursday's rally, and a bullish weekly high close on Friday would provide them with better upside momentum, a technical analyst said. However, bears still have a slight overall near-term technical advantage, he said.


The next downside price objective for the bears is pushing and closing CBOT December wheat below psychological 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$8.55, he said.


First resistance is seen at Thursday's high of US$8.50 3/4 and then at US$8.55. First support lies at US$8.35 and then at US$8.25.


Traders are looking ahead to the release of U.S. Department of Agriculture crop reports, due out at 8:30 a.m. EDT Tuesday. There could be some positioning ahead of the weekend and the reports, a trader said.


U.S. spring wheat areas should see a drying pattern into next week, which could accelerate harvest, Country Hedging said in a market comment. Still, scattered showers and thunderstorms next Monday will cause "some disruptions" in cutting, according to a forecast from DTN Meteorlogix.


In Australia, showers and rain will continue to favor southeastern areas during the next five days, Meteorlogix said. Temperatures should be near to below normal, and conditions "mostly favor" wheat, the private weather firm said.

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