January 5, 2009

 

US Wheat Outlook on Monday: Seen lower on profit-taking, firm dollar

 

 

Profit-taking and pressure from outside markets are expected to push U.S. wheat futures lower at the start of Monday's day session.

 

Chicago Board of Trade March wheat is called to open 10 to 12 cents per bushel lower. In overnight electronic trading, CBOT March wheat fell 11 cents to US$6.

 

The markets are poised to slide as traders book profits after CBOT March wheat rallied more than US$1 since Dec. 5, traders said. CBOT March wheat Friday closed slightly higher, near its session high and at a bullish weekly high close, a technical analyst said.

 

The trend in the markets is still up following last month's rally, despite expectations for prices to slip at the opening Monday, the analyst said. "Bulls have gained some near-term upside technical momentum recently as a four-week-old uptrend is in place on the daily bar chart," he said.

 

The next upside price objective for the bulls is to close CBOT March wheat above solid chart resistance at US$6.50, the analyst said. The next downside price objective for the bears is to produce a close below solid technical support at last week's low of US$5.84 3/4, he said.

 

First support is seen at US$6 and then at Friday's low of US$5.92. First resistance is seen at last week's high of US$6.16 and then at US$6.25.

 

Strength in the U.S. dollar should weigh on the markets, as it gives foreign countries less buying power to import U.S. grain, analysts said. Demand for U.S. wheat has been sluggish lately, although weekly export sales announced last week were above expectations, they said.

 

The Black Sea region, in particular, has been undercutting the U.S. for wheat export sales. Philippine feed millers have imported more than 300,000 metric tonnes of wheat since October, mostly from Ukraine, an industry official said Monday.

 

Wheat prices in China's major producing areas were mostly stable in the week to Monday, supported by purchases ahead of Chinese New Year. Wheat consumption is usually strong before the Chinese New Year holiday, which starts Jan. 25 and lasts for one week, and wheat flour processing plants are buying to prepare for holiday consumption, an analyst said.

 

Looking at the weather, a long dry spell in southeastern Australia continued in 2008 even as the rest of the country received near-average annual rainfall, the government's Bureau of Meteorology reported Monday. Drought cut output Down Under in 2007 and 2006.

 

In the U.S. Midwest, there is a chance for snow, freezing rain and rain through southeastern and far eastern areas from Tuesday into Wednesday. The conditions present "no significant threat to dormant wheat during this week," DTN Meteorlogix said. Wheat in the U.S. central and southern Plains doesn't face any significant weather threats either, the private weather firm said.

 

In other news, the Commodity Futures Trading Commission will issue its weekly Commitments of Traders report at 3:30 p.m. EST Monday. The reports were delayed a day because of last week's New Year's Day holiday.