August 19, 2008
US Wheat Outlook on Tuesday: 10-12 cents weaker on profit-taking, setback


U.S. wheat futures are poised to start Tuesday's day session lower, with the markets pulling back from strong gains Monday amid leadership from weak row crops.


Chicago Board of Trade September wheat is called to open 10 to 12 cents per bushel lower. In overnight electronic trading, CBOT September wheat lost 11 3/4 cents to US$8.48, and CBOT December wheat dropped 11 3/4 cents to US$8.73.


Wheat should feel some pressure from CBOT corn and soybeans, which were lower overnight after climbing Monday. Strength in the U.S. dollar and weakness in outside markets, such as crude oil and gold, are bearish for the grains.


Traders are expected to take profits off the table after Monday's rally. There are ideas the markets will see a "Turnaround Tuesday" scenario, as the gains were "overdone," a CBOT floor analyst said.


"Wheat continues to be extremely volatile, but direction is generally correlated with row crops," Country Hedging said in a market comment.


The bulls have the near-term technical advantage in wheat, a technical analyst said. However, the upside is limited as CBOT December wheat approaches major psychological resistance at US$9.00, he said.


The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$8.50, the analyst said. Bulls' next upside price objective is to push and close December futures prices above solid resistance at last week's high of US$9.12 3/4, he said.


First resistance is seen at US$9.00 and then at US$9.12 3/4. First support lies at US$8.75 and then at US$8.60.


"Trading has turned very choppy," the technical analyst said.


The bulls' enthusiasm could be tempered by news that Pakistan indefinitely postponed issuing a tender seeking as much as 250,000 metric tonnes of wheat, a CBOT floor trader said. Pakistan said the delay was due to expectations that local output will match demand in the current season.


In other news, the U.S. Department of Agriculture said 35% of the U.S. spring wheat crop was harvested as of Sunday, up from 16% the previous week but below the five-year average of 54%. There are concerns about the quality of the crop, with a lot of the harvested spring wheat containing less than 14% protein, said Nathan Mangold, an Advance Trading broker.


Spring wheat's good-to-excellent condition rating for the crop rose 3 percentage points to 56%, according to the USDA. There are "no significant concerns for maturing wheat or the harvest, despite some chance for showers and cooler temperatures later this week" in the U.S. northern Plains, DTN Meteorlogix said.


In Argentina, where more rain would help the crop, the next significant chance for shower activity appears to be next Tuesday into Wednesday, Meteorlogix said. There is no significant rainfall in the forecast during the next seven days in Australia, where wheat could also use a drink of water, the private weather firm said. 

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