October 21, 2008

 

US Wheat Outlook on Tuesday: Lower as outside markets overwhelm fundamentals

 

 

A mildly bearish shadow U.S. wheat futures is expected to continue hovering over the pits when trading opens Tuesday.

 

Chicago Board of Trade December wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT December wheat dropped 4 cents to US$5.59 1/2.

 

"There's not much around but the firmer dollar and weaker outside markets and crude oil" a CBOT floor trader said. "I wouldn't sell [wheat] too hard. This market could snap back pretty fast."

 

A firm cash basis level is providing support, the trader said.

 

Buying interest is limited in wheat and while losses where limited Monday "wheat's weakness in the face of strength elsewhere said a lot about bearish sentiment currently present in the wheat pits," said Arlan Suderman, Farm Future market analyst.

 

Wheat bears set the tone for Monday's trade and are gunning to push and close "below solid technical support at last week's low of US$5.43," a technical analyst said, marking first support at Monday's low of US$5.54 and then US$5.43.

 

As bulls move to penetrate "major psychological resistance at US$6 a bushel," first resistance lies at Monday's high of US$5.79, the technician said.

 

In its weekly crop progress report released Monday, the USDA said 60% of the U.S. winter wheat crop had emerged, up from 53% in 2007 and the five-year average of 58%. Winter wheat plantings were 79% complete, on par with last year and slightly below the average of 81%.

 

Recent rains in the Plains have helped the hard red winter wheat crop get off to a good start, analysts said.

 

The crop progress report was neutral to negative for U.S. wheat futures, said Joe Victor, vice president of marketing for Allendale. It is neutral because plantings are in line and negative because emergence is a bit above average, he said. The Plains states should experience rain to the south and possibly mix with snow in the upper-central areas; temperatures should range from 32-77 degrees Fahrenheit, DTN Meteorlogix said.

 

The rain, which will move into the Midwest around Thursday, should benefit planting and development efforts, the private weather forecasting firm said.

 

"Soil moisture mostly will favor early growth of wheat, except for portions of Indiana and Ohio where it may still be too dry," DTN said.

 

In global trading news, Japan's Ministry of Agriculture, Forestry and Fisheries is seeking 75,000 metric tonnes of wheat in a tender to be concluded Thursday, a ministry official said Tuesday.

 

The shipments are expected to arrive in Japan between Dec. 21 and Jan. 31.

 

Pakistan's government expects the country's wheat output to rise to 25 million metric in the financial year ending June because of higher prices and greater acreage, Farm Minister Nazar Muhammad Gondal said Tuesday.

 

The increased crop should equal the country's demand if it holds at last year's level.