January 2, 2009

 

US Wheat Outlook on Friday: 3-5 cents lower on setback, spillover selling

 

 

U.S. wheat futures are expected to start lower Friday in a pullback from gains Wednesday and on weakness in other markets.

 

Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel lower. There was no overnight electronic trading due to the New Year's Day holiday Thursday.

 

There are ideas wheat is due for a setback after a rally last month, traders said. CBOT March wheat finished December up nearly US$1.40 from its monthly low of US$4.71. The contract closed up 6 cents Wednesday ahead of the holiday Thursday.

 

"We should probably give a chunk back," a CBOT trader said about the gains.

 

If CBOT March wheat extends last month's rally, an Oct. 6 crossing at US$6.60 is the next upside target, a technical analyst said. Closes below the 20-day moving average crossing around US$5.44 would temper the near-term friendly outlook in the market, he said.

 

Without any overnight activity to set the tone for the day session, the grains will take early direction from outside markets, an analyst said. Weakness in crude oil and strength in the U.S. dollar are seen as bearish for the grains, he said.

 

A softer dollar is generally considered bearish because it gives foreign countries less buying power to import U.S. grains. Crude oil is linked to the grains because funds often trade in a basket of commodities and because ethanol is made from corn.

 

Wheat will be keeping an eye on activity in CBOT corn and soybeans markets during the session, traders said. It seems as though wheat needs support from gains in the neighboring markets to rise, they said. Corn and soy are called to open lower.

 

"We need some help from somewhere else," a wheat trader said.

 

Weekly U.S. wheat export sales of 418,100 tonnes were "solid," a CBOT trader said. The sales were up 65% from the previous week and 74% from the prior four-week average, the U.S. Department of Agriculture said. Analysts had expected sales of 100,000 to 200,000 tonnes.

 

Sales of 165,000 tonnes of white wheat accounted for the biggest portion by class, according to the USDA. Iran bought 60,600 tonnes of white wheat.

 

There are no major weather concerns for U.S. winter wheat, which is dormant, for the next week, private weather firm DTN Meteorlogix said in a forecast.