September 8, 2008
US Wheat Outlook on Monday: Slightly firmer on borrowed strength
U.S. wheat futures should start Monday's day session slightly higher on borrowed strength from outside and neighboring markets, although wheat could trade both sides.
Chicago Board of Trade December wheat is called to open 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT December wheat jumped 1 1/2 cents to US$7.53.
Grains should feel support from crude-oil prices, which are stronger amid concerns that Hurricane Ike could slow output. The potential for near-term economic stability after the U.S. government's takeover of mortgage giants Fannie Mae and Freddie Mac also is offering some support, although a related rally in the U.S. dollar is bearish for commodities, analysts said.
Wheat could trade both sides during the day session, after closing with only modest gains overnight, a CBOT floor trader said. CBOT December wheat traded as much as 26 1/2 cents higher during the overnight session before trimming gains. The technical outlook for wheat remains bearish following recent setbacks, a trader said.
"I don't trust it," the floor trader said of the overnight strength.
Traders continue to watch forecasts for the southern hemisphere amid worries about dry patches in Australia's and Argentina's wheat areas. The U.S. Department of Agriculture is expected to trim its forecast for a 25-million-tonne Australian wheat crop in a supply/demand report due out Friday, traders said.
Rainfall of 1/2 inch to 2 inches that fell last week in Australia's southern Queensland and northern New South Wales should give the crop a boost, DTN Meteorlogix said. Argentina needs more rains but will stay mostly dry during the next seven days, the private weather firm said.
The U.S. Department of Agriculture is due to issue its weekly crop progress report at 4 p.m. EDT, including an update on the U.S. spring-wheat harvest. Cool, damp conditions in the northern Plains may mean harvest delays for spring wheat, Meteorlogix said.
Scattered showers in the U.S. central and southern Plains will help replenish soil moisture for planting hard red winter wheat this month, Meteorlogix said. Rain is needed for the next winter-wheat crop in the east Ukraine and south Russia, the private weather firm said.
Russia harvested 51.8 million tonnes of wheat as of Sept. 8, 11.1 million tonnes more than on the year-earlier date, the agriculture ministry said. The average yield was 2.78 tonnes a hectare, which is 0.36 tonnes/ha more than a year ago.
The next downside price objective for the bears is pushing and closing CBOT December wheat below major psychological support at US$7.00, a technical analyst said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at US$7.98 1/2, which would fill on the upside a downside price gap on the daily chart, he said.
First resistance is seen at US$7.71 and then at Friday's high of US$7.76. First support lies at Friday's low of US$7.43 3/4 and then at US$7.20.