September 23, 2008
US Wheat Outlook on Tuesday: Down in turnaround, eyeing outside markets
U.S. wheat futures are poised to start Tuesday's day session modestly lower in a turnaround from Monday's gains amid strength in the dollar and weakness in outside markets.
Chicago Board of Trade December wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT December wheat slipped 3 1/4 cents at US$7.34 1/2.
Wheat should slump amid general weakness in commodities after a broad-based rally Monday, an analyst said. The U.S. dollar is stronger, which is seen as bearish for the grains because it gives foreign importers less buying power.
The outside markets are the key focus for grains, with fundamentals seen taking a back seat. Wheat, a follower of other markets, will keep its eye on lower crude oil, corn and soybeans, an analyst said.
"I would expect to see a turnaround Tuesday scenario," said Jerry Gidel, analyst for North America Risk Management Services. "I would anticipate a little bit of consolidation."
The wheat bears still have the near-term technical advantage after a recent sell-off, a technical analyst said. Prices are still in a four-week-old downtrend on the daily bar chart, he said.
The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$7.14, the analyst said. The bulls' next upside price objective is to push and close December futures prices above solid technical resistance at Monday's high of US$7.57 3/4, he said.
First resistance is seen at US$7.50 and then at US$7.57 3/4. First support lies at US$7.25 and then at US$7.14.
It is "encouraging" that CBOT December wheat is holding above US$7, a psychological level of support, Gidel said. The market has encountered general resistance in the area above US$7.50, he said.
After the close Monday, the U.S. Department of Agriculture, it its weekly wheat crop progress report, said 22% of U.S. winter wheat was planted, below the 24% planted at the same time last year and the average of 30%. The planting progress is "solid," up from 11% a week ago, Gidel said.
Recent rainfall has helped recharge soil moisture for early growth of hard red winter wheat in the U.S. central and southern Plains, DTN Meteorlogix said. Warmer, drier weather this week should favor field work and the early planting effort, but it will also reduce available soils moisture for the crop, the private weather firm said.
Rain is still needed for developing wheat in central Argentina, especially in Cordoba, Santa Fe and northern Buenos Aires. The Meteorlogix forecast calls for some chance for showers during Saturday and again early next week.
Potentially crop-saving rains have fallen on some Australian winter crops, including in parched southern New South Wales state, the government's Bureau of Meteorology reported for the 24 hours ended Tuesday morning. The heaviest falls were recorded in areas on the western slopes of the Great Dividing Range but also extended westward into the vast wheat lands in central and southern areas of New South Wales, according to data issued by the bureau.
Showers later this week should help the crop recover from a cold snap earlier this week, with moisture still needed in South Australia and Victoria, Meteorlogix said. The USDA estimates Australia's crop at 22 million tonnes, up from about 13 million last year, when drought slashed output.