September 29, 2008

 

US Wheat Outlook on Monday: Lower on fimer dollar, outside markets

 

 

A firmer U.S. dollar is expected to pressure U.S. wheat futures at the start of Monday's day session, but the progress of the government's proposed financial rescue package continues to dominate investor attention.

 

Chicago Board of Trade December wheat is called to open 15-17 cents a bushel lower. In overnight electronic trading, CBOT December wheat slipped 15 cents to US$7.01.

 

"Wheat's expected to be a follower, driven by outside markets and a firmer dollar," a CBOT floor trader said. "Crude oil is getting hammered, which should add pressure."

 

The House of Representatives is scheduled to vote Monday on a rescue package for the U.S financial industry that could go as high as US$700 billion. The Senate's vote is expected as early as Wednesday.

 

The bears are in control and gained more momentum after last week after wheat futures at the CBOT and the Kansas City Board of Trade posted losses for the week on Friday, a technical analyst said.

 

For CBOT December wheat, bears are gunning for major psychological support at US$7 a bushel, a level breached in overnight trade, the market technician said.

 

At the KCBT, the next support for the December contract is US$7.30, he added.

 

"Wheat prices were sharply lower in early European trading, falling more than 3%," Bryce Knorr, Farm Futures senior editor, said in a Monday morning commentary. "Cheaper prices are bringing more buyers to the table, with interest increasing out of the Middle East, where a drought cut production."

 

"Jordan is tendering for 3.7 million bushels of hard wheat, though it bought from Russia for its last purchase in August," Knorr said. "Japan is also expected to resume wheat tenders in October, after a scandal over tainted rice halted new deals in September."

 

The U.S. Department of Agriculture at 8:30 a.m. EDT Tuesday is slated to issue its quarterly grain stocks and small grains reports, which could provide the markets some direction, an analyst said. The stocks estimate is important because it provides an indication of wheat usage, including summer feed use.

 

The average of analysts' estimates for wheat stocks as of Sept. 1 is 1.932 billion bushels, up from 1.717 billion last year, according to a survey of 13 analysts by Dow Jones Newswires. Stocks are expected to rise from last year due to increased production.

 

Analysts generally expect the USDA to trim its all wheat production estimate from last month in the small grains report, but the number is expected to be too small to affect the wheat futures market, a CBOT floor trader said.

 

The average of analysts' estimates for 2008-09 all wheat production was 2.459 billion bushels, down slightly from the USDA's August estimate of 2.462 billion, but up from 2.067 billion last year.

 

"Farm Futures models show the drop could be around 15 million bushels, due to lower spring wheat production," Knorr said.

 

In Australia, rains fell in southeastern region of wheat regions of Victoria and southern New South Wales over the weekend and showers are expected to continue Monday, but turn drier into the week, according to private weather firm DTN Meteorlogix.

 

In northern New South Wales and southern Queensland it was dry and is expected to stay that way, Meteorlogix said.

 

Argentina saw some showers and thunderstorms late Saturday and Sunday, but it is expected to be dry the rest of the week, the forecast said. Both Australia and Argentina have seen stretches of dryness that have stressed crops there, Meteorlogix adds.