August 22, 2008


US Wheat Outlook on Friday: Setback seen amid weakness in other markets



U.S. wheat futures are poised to drop at the start of Friday's day session in a pullback from gains and on weakness in other markets.


Chicago Board of Trade December wheat is called to open 7 to 10 cents per bushel lower. In overnight electronic trading, CBOT December wheat dipped 8 3/4 cents to US$9.13 1/2.


Wheat is expected to follow CBOT corn and soybeans down after rising earlier in the week. Traders may want to take money off the table ahead of the weekend, with CBOT December wheat already up 73 cents on the week as of Thursday's close, an analyst said.


Wheat jumped Thursday with the help of a weaker U.S. dollar and strength in outside markets. The dollar was firmer ahead of the grains opening Friday, while crude oil was on the defensive.


Trading will likely remain choppy, and the market could show some technical strength, a trader said. Bulls have "solid upside technical momentum" after recent gains, 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$9.00, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid resistance at Thursday's high of US$9.57, he said.


First resistance is seen at US$9.30 and then at US$9.40. First support lies at US$9.12 3/4 and then at US$9.00.


In other news, Statistics Canada estimated all-wheat production at 25.425 million tonnes as of July 31, within trade estimates of 24.67 to 26.50 million tonnes. The estimate is in line with the U.S. Department of Agriculture's forecast of 25 million tonnes.


There continue to be worries about the potential for Australia's crop due to dryness in some growing areas. A new cold air mass moving into the eastern wheat belt Friday will keep growth rates slower than normal, DTN Meteorlogix said in a forecast.


There are signs next week will be somewhat warmer, although rain chances are still limited, Meteorlogix said. The crop will need "increasing amounts of moisture as growth rates increase with the warmer spring temperatures during the coming weeks," the private weather firm said.


More rain would also benefit crop planting, emergence and development in Argentina, especially in northern portions of the central grain belt, Meteorlogix said. The next significant chance for shower activity appears to be Wednesday to Thursday, the firm said.


Argentina, which blocked wheat exports in November to protect domestic supplies, said it had authorized an additional 1.4 million tonnes of 2007-08 wheat for export. The government has already authorized the export of about 2 million tonnes this year.


Argentina's Agriculture Secretariat trimmed its forecast for the 2008-09 wheat planting by 200,000 hectares to 4.5 million hectares as dry weather prevented planting. Farmers have seeded 95% of the wheat crop and just 15 days remain to complete planting, making the forecast dependent on improving moisture levels, the Secretariat said.


In the U.S., there are no significant concerns for maturing spring wheat or the ongoing harvest in the northern Plains, despite some showers in the region Thursday. There is another chance for some rain early next week, Meteorlogix said.

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