September 9, 2008

 

US Wheat Outlook on Tuesday: 10-15 cents lower on technical weakness, carryover

 

 

Follow-through selling from the overnight session and technical weakness are expected to drive U.S. wheat futures lower at the start of Tuesday's day session.

 

Chicago Board of Trade December wheat is called to open 10 to 15 cents per bushel lower. In overnight electronic trading, CBOT December wheat sank 15 1/2 cents to US$7.28 1/4.

 

The path of least resistance in wheat is to the downside following recent sell-offs, traders said. The markets should feel spillover pressure from weak crude oil and from CBOT corn and soybeans, which traded lower overnight, they said.

 

The next level of support from CBOT wheat is at US$7 and then around US$6.58, a CBOT floor trader said. The markets look as though they've "got more room to run on the downside," he said.

 

E.U. wheat also was weaker. Liffe Paris November milling wheat briefly hit a 14-month low of EUR166.50/tonne as the market continued a downward trend seen since late February.

 

Bearish expectations for a record world wheat crop continue to hang over the markets after producers expanded plantings to take advantage of high prices. Weather has been mostly favorable for the crop around the world, although there are concerns about dryness in Australia and Argentina.

 

Rain is needed to support favorable development of wheat in Argentina, especially through western crop areas, DTN Meteorlogix said. However, the region should stay dry or see only a few light showers during the next seven days, the private weather firm said.

 

In Australia, 1/2 inch to 2 inches of rains, with locally heavier totals, fell through southern Queensland and northern New South Wales late last week. Late jointing to early reproductive wheat in this area will "greatly benefit" from the moisture, Meteorlogix said.

 

A drier and sometimes warmer weather pattern in the U.S. northern Plains will help producers finish up the spring wheat harvest during the next 10 days, Meteorlogix said. The U.S. Department of Agriculture said 87% of the crop was cut as of Sunday, up from 81% the previous week and down from the average of 90%.

 

The next downside price objective for the bears is pushing and closing CBOT wheat below psychological support at US$7.00, a technical analyst said. Bulls' next upside price objective is to push and close the contract 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$7.50 and then at Monday's high of US$7.78. First support lies at Monday's low of US$7.41 and then at US$7.25.

 

In other news, the Russian agriculture ministry is carefully monitoring grain exports and may impose limits on milling wheat exports if the domestic market needs to be protected, an official said. He said the step might be taken because "there wasn't all that much milling wheat on the domestic market."

 

The potential for Russian export limits isn't worrying the markets yet because there is so much wheat around the world, a CBOT trader said. But export curbs could eventually be supportive to U.S. wheat, particularly higher quality hard red wheat, if high quality wheat around the world gets sucked up, he said.

 

Morocco's state wheat buyer, meanwhile, said it was tendering to buy 65,000 metric tonnes of soft milling wheat, of any origin, from importers inside the country. It said 40% of the quantity should be delivered before Sept. 16, 30% before Oct. 16 and another 30% before Nov. 16. The deadline for bids is Sept. 11.