September 9, 2009

 

US Wheat Outlook on Wednesday: Seen 5-7 cents down on plentiful world supply

 

 

Ongoing bearishness about ample world supplies is expected to weigh on U.S. wheat futures Wednesday after prices tagged fresh contract lows overnight.

 

Chicago Board of Trade December wheat is called to open 5 to 7 cents per bushel. In overnight electronic trading, CBOT December wheat slid 5 3/4 cents to US$4.53 1/4.

 

CBOT December wheat overnight hit a fresh contract low of US$4.52 3/4, below Tuesday's contract low of US$4.57. Prices are in a three-month-old downtrend on the daily bar chart, a technical analyst said.

 

Large global supplies and lackluster export demand for U.S. wheat continue to be fundamentally bearish for the markets, analysts said. The U.S. Department of Agriculture may need to raise its estimate for U.S. spring wheat production to reflect the big yields in North Dakota, according to a note from Country Hedging.

 

Traders are waiting for USDA to issue fresh production and supply/demand data at 8:30 a.m. EDT Friday. The data will be more important for corn and soybeans than for wheat as the government may put off major adjustments until it issues its small grains report Sept. 30, an analyst said.

 

"Wheat has another three weeks to fret about a blockbuster upward adjustment to '09 U.S. all wheat production on the September 30th report," MF Global said in a note. "Sell rallies."

 

Spring wheat harvest was 58% complete as of Sunday, below the average of 88%, according to the USDA. Cutting has been delayed because producers planted the crop late in the spring. In North Dakota, the largest spring wheat-growing state, 44% of the crop was cut, down from the average of 86%.

 

Rain and thunderstorms in the northern U.S. Plains will likely mean harvest delays this week, especially through eastern and southern locations, private weather firm DTN Meteorlogix said. Temperatures continue to favor late development of crops, the weather firm said.

 

North of the border, Statistics Canada's estimate for all-wheat stocks of 6.556 million tonnes topped trade expectations of 6 million to 6.3 million.

 

In other news, weather indicators suggest an El Nino event is developing across the Pacific Basin, a negative development for Australia's winter crops that may face drier than usual weather during a key growth period. However, the El Nino progress has slowed in recent weeks, Australia's Bureau of Meteorology said.

 

Rain fell in Australia late last week and early in the weekend, with good coverage through northern New South Wales and extreme south Queensland, according to Meteorlogix. That will help ease stress to jointing and early reproductive wheat, but the region looks to have mostly dry conditions during the next week, the firm said.

 

The next downside price objective for bears is pushing and closing CBOT December wheat below solid technical support at US$4.25, 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$5.02, he said.

 

First resistance is seen at Tuesday's high of US$4.75 3/4 and then at US$4.90. First support lies at Tuesday's contract low of US$4.57 and then at US$4.50.