September 30, 2008

 

US Wheat Outlook on Tuesday: Seen steady-firmer, eyeing outside markets

 

 

U.S. wheat futures are poised to start Tuesday's day session steady to firmer as traders continue to watch outside markets following the release of government crop reports.

 

In overnight electronic trading, CBOT December wheat jumped 14 1/4 cents to US$6.82 1/4.

 

Grains will keep an eye on financial markets after the defeat of a proposed US$700 billion bailout package in the U.S. House of Representatives that sent U.S. stocks plunging Monday, an analyst said. Crude oil also should provide direction, with the market trending higher early Tuesday, he said.

 

"You've got the equity markets bouncing a little bit," said Chad Henderson, analyst for Prime Agricultural Consultants. "It's hard to believe that's going to be negative on the opening."

 

But there could be some end-of-the-month profit-taking in the markets, a trader said. Trading is expected to remain "squirrely" given recent volatility, he said.

 

The U.S. Department of Agriculture's small grains and quarterly stocks report were seen as neutral-to-supportive for wheat, traders said. The stocks estimate indicated strong feed usage, while the estimate for total wheat production was increased.

 

Wheat stocks as of Sept. 1 were pegged at 1.857 billion bushels, below the average analyst estimate of 1.932 billion. All wheat production was seen at 2.5 billion bushels, above the average estimate of 2.459 billion and the USDA's August estimate of 2.462 billion.

 

"We fed a lot more wheat than we thought," said Terry Reilly, analyst for Citigroup Inc. (C). "Obviously the dip in wheat prices had a profound effect on users' choice for feed."

 

Spring wheat production was raised to 547 million bushels from 501 million in August. That was surprising because there was "a large dry swath in Montana and western North Dakota," said Louise Gartner, analyst for Spectrum Commodities.

 

The next chance for showers in Australia appears to be for New South Wales later this week, Meteorlogix said. Recent rains have favored wheat growth in New South Wales, although dryness is still of significant concern in wheat areas of South Australia and Victoria, the private weather firm said.

 

A few showers are possible in Argentina Tuesday night and early Wednesday morning and then again Thursday night into Friday, Meteorlogix said. Rainfall will help improve the outlook for wheat after a dry late fall and winter period, the firm said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$6.50, a technical analyst said. The bulls' next upside price objective is to push and close December futures prices above major psychological resistance at US$7.00, he said.

 

First resistance is seen at US$7.00 and then at Monday's high of US$7.15 3/4. First support lies at Monday's low of US$6.66 1/4 and then at US$6.50.