August 12, 2008

 

US Wheat Outlook on Tuesday: Seen lower on spillover from weak corn

 

 

U.S. wheat futures are poised to start Tuesday's day session on the defensive on spillover pressure from weak Chicago Board of Trade corn, which is expected to tumble on bearish government crop estimates, traders said.

 

CBOT September wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT September wheat rose 1 1/4 cent to US$7.95, while CBOT December wheat slipped 3 cents to US$8.15 1/2.

 

Wheat is seen following CBOT corn to the downside following the release of bearish U.S. Department of Agriculture data projecting a bigger U.S. 2008-09 corn crop than expected, a trader said. The government reports were seen as mostly "neutral" for wheat, with no "earth-shattering" forecasts, he said.

 

The USDA projected 2008-09 U.S. all-wheat production at 2.462 billion bushels, compared to the average analyst estimate of 2.459 billion and USDA's July estimate of 2.461 billion. The range of analysts' pre-report guesses was 2.422 billion to 2.537 billion.

 

The adjustment was not a big surprise, as traders had not been looking for a big change in production, a CBOT floor broker said. Despite early calls for a higher start in corn, wheat could easily come under pressure from losses in corn, he said.

 

The market could still feel underlying support from "solid global wheat demand," a trader said.

 

Production of spring wheat other than durum came in at 501 million, compared to the average analyst estimate of 510 million and the USDA's July estimate of 507 million. The range of analysts' pre-report estimates was 485 million to 570 million. Spring wheat's good-to-excellent rating dropped three percentage points to 53%, the USDA said in its weekly crop progress report. The USDA said 16% of the spring wheat crop was harvested, up from 6% last week but below the five-year average of 36%.

 

Rainfall early this week is unfavorable for maturing spring wheat and any harvesting, DTN Meteorlogix said in a forecast. The Dakotas "need to dry out some for harvest to resume," Country Hedging said in a comment.

 

In Argentina, more rain would benefit crop planting, emergence and development, especially in northern portions of the central grain belt. Showers may develop in the region later this week or early in the coming weekend, Meteorlogix said.

 

Conditions in Australia "mostly favor wheat at this time," Meteorlogix said. The outlook for the week appears drier, with colder temperatures in the east and warmer temperatures in the west, the private weather firm said.

 

Production estimates for Australia's new wheat crop have increased slightly following a wet July in many growing areas, the chairman of the Grain Growers Association said. The country's production is now forecast at 24 million metric tonnes, up about 500,000 tonnes from a month ago, he said, citing the latest forecast from private concern Australian Crop Forecasters.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below psychological support at US$8.00, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at last week's high of US$8.50 3/4, he said.

 

First resistance is seen at US$8.25 and then at Monday's high of US$8.38. First support lies at US$8.10 and then at US$8.00.
   

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