September 12, 2008
US Wheat Outlook on Friday: Seen firmer on CBOT corn, soy spillover
Gains in neighboring markets are expected to lead U.S. wheat futures higher Friday following advances overnight and the release of government data seen as supportive for row crops.
Chicago Board of Trade December wheat is called to open 5 to 10 cents per bushel higher. In overnight electronic trading, CBOT December wheat climbed 13 cents to US$7.39 1/4.
Wheat should keep its eyes on activity in CBOT corn and soybeans, which are called to start higher on bullish U.S. Department of Agriculture crop reports, an analyst said. The government lowered its estimates for 2008-09 U.S. corn and soybean production and yields from last month.
There was not much in the crop reports to stir up the wheat markets, traders said. The USDA kept its estimate for 2008-09 U.S. wheat ending stocks unchanged at 574 million bushels, contrary to expectations for a decline.
"I think wheat is going to be very much in a follower's role," said Brian Hoops, president of Midwest Market Solutions. "Demand is just not strong enough to start cutting into ending stocks in the wheat."
The USDA, as expected, cut its forecast for Australia's wheat crop due to dryness in Western Australia and in pockets of southeastern Australia. Production dropped 3 million tonnes from August to 22 million.
Late jointing to early reproductive wheat in Australia's central and northern New South Wales and southern Queensland will likely benefit from additional shower activity during the coming days, DTN Meteorlogix said in a forecast. However, vegetative to jointing wheat elsewhere in Australia will see only light showers during the next seven days, the private weather firm said.
The USDA trimmed its estimate for Argentina's crop 1 million tonnes to 12.5 million tonnes, as "excessive dryness reduces planted area and continues to hamper crop development, particularly in the north central growing regions." The next chance for rain in Argentina appears to be next Thursday into Friday, but only light showers are expected in southern and east-central growing areas, Meteorlogix said.
Production was increased 3 million tonnes for Russia and 2.5 million tonnes for Ukraine on higher reported area and harvest results that indicate greater yields. EU-27 production was raised 4 million tonnes, as harvest results indicate higher-than-expected yields, especially in Germany, which accounts for half of the month's increase.
Overall, global 2008-09 wheat production was projected at a record 676.3 million tonnes, up 5.5 million from last month. The world is expected to grow more wheat than ever before after farmers expanded plantings to take advantage of high prices.
Looking at technical charts, bears still have the solid technical advantage, a market technician said. CBOT December wheat prices Thursday closed slightly higher after hitting a fresh 9 1/2-month low.
The next downside price objective for the bears is pushing and closing CBOT December wheat below psychological support at US$7.00, the technician said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at the August low of US$7.71, he said.
First resistance is seen at Thursday's high of US$7.34 1/4 and then at US$7.40. First support lies at Thursday's low of US$7.14 and then at US$7.00.
Liffe's Paris Nov milling wheat was up EUR1.75, or 1%, with the gains in CBOT grains seen as supportive. However, the support impact was partially offset by strength in the euro versus the dollar.