November 11, 2008


US Wheat Outlook on Tuesday: Lower on bearish outside tone



U.S. wheat futures are expected to open Monday's trading session modestly lower, as traders say lower equities and crude oil are setting a bearish tone.


Chicago Board of Trade December wheat is called to open 4 to 6 cents per bushel lower. In overnight electronic trading, CBOT December wheat dropped 4 1/4 cents to US$5.15 3/4.


"The wheat market by itself doesn't have a story and will continue to be swayed by outside markets," said Benson Quinn analyst Dave Lehl in daily market comments. "Strength in the corn market could be supportive, but corn's rally may be short lived."


After weakening Monday and closing near mid-range after factors including crude oil, corn and soybean strength and a weaker dollar lifted the contract, wheat bears maintain the overall technical advantage, analysts said.


Bears are aiming to close below solid technical support at the October low of US$4.96 1/2, a market technician said, marking first support at Monday's low of US$5.05 1/4.


Wheat bulls are working to close December futures prices above solid technical resistance at last week's high of US$5.87 3/4 a bushel with first resistance at Monday's high of US$5.36 1/4.


U.S. wheat exports continue to fight cheaper foreign competitors, a CBOT floor trader said.


But U.S. quality still drives some sales.


Japan's Ministry of Agriculture, Forestry and Fisheries is seeking 100,000 metric tonnes of U.S. wheat in a tender to be concluded Thursday, an agriculture ministry official said Tuesday.


Wheat planting and development continues to be aided by favorable soil moisture conditions in the U.S. northern Plains, DTN Meteorlogix said.


Planting progress is behind normal through the north Delta and some soft red winter wheat areas would benefit from rain, the private weather forecasting firm said.


Conditions are mostly dry in the Midwest, but scattered showers in the southwest and west are expected through Wednesday and in the eastern portions of the regions Friday. Flurries in the north and west are expected Friday and Saturday.


According to the U.S. Department of Agriculture's weekly crop progress report, 68% of the nation's winter wheat crop was rated good to excellent, up one percentage point from this time last week. The highest quality ratings were ahead of the 49% achieved at this time last year.


In Kansas, the top hard red winter wheat-producing state, 78% of the crop was rated good to excellent, ahead of the 73% that qualified for the highest ratings last year.


The USDA said 83% of the U.S. winter wheat crop had emerged, up from 76% last week and down from the 84% average. Winter wheat plantings were 94% complete, up from 90% last week and even with the average and 2007.


In Ohio, where soft red winter wheat is grown, 100% of the crop was emerged, up from 99% last year and the average of 87%.


In Argentina, "mainly favorable conditions for developing and maturing wheat through southern portions of central Argentina," Meteorlogix said.


Australia faces mostly favorable conditions for filling to maturing wheat, but dryness and drought continue to pressure the southern regions.


But bearish factors, including anticipated weakness in U.S. wheat futures and a stronger local currency, are expected to weigh on Australia's most active wheat futures contract, said Markus Helsing, of brokerage Tricom Equities.

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