January 5, 2010

 

US Wheat Outlook on Tuesday: Seen mixed, downside pressure possible

 

 

U.S. wheat futures are expected to start mixed Tuesday, with some downside pressure seen as possible after prices soared Monday.

 

In overnight electronic trading, Chicago Board of Trade March wheat slipped 1/4 cent to US$5.57 1/2.

 

Wheat could see profit-taking in early dealings after CBOT prices jumped nearly 3% on Monday, traders said. The wheat markets on Monday held up better than neighboring CBOT corn and soybeans, which ended firmer but well off session highs.

 

Monday's rally gave wheat some upside technical momentum, traders said. The gains indicate CBOT March wheat should move to US$5.71, according to Benson Quinn Commodities.

 

Kansas City Board of Trade March wheat should hit US$5.74, and Minneapolis Grain Exchange March wheat should move to US$5.77, the firm said. KCBT March wheat overnight fell 1 cent to US$5.49 3/4, and MGE March wheat rose 1 cent to US$5.62.

 

Traders expect index funds to rebalance their positions and put more money into the grains starting Friday, a CBOT floor analyst said. There is "a window for the market to experience some weakness during the middle of the week," but anticipation of the fund buying is supportive and should limit losses, Benson Quinn said in a note.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at US$5.30, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.80, he said.

 

First resistance is seen at Monday's high of US$5.61 1/4 and then at US$5.70, the technical analyst said. First support lies at US$5.50 and then at Monday's low of US$5.44, he said.

 

There is not much fresh fundamental news out for the markets to digest. Wheat's supply and demand storyline remains unsupportive, with world supplies considered large and U.S. export demand seen as weak.

 

Weather conditions in the U.S. central and southern Plains should be "generally favorable" for dormant hard red winter wheat, with no damaging cold expected, according to private weather firm DTN Meteorlogix. Wheat can be damaged if it is exposed to cold temperatures for a long enough period of time.

 

HRW wheat is protected by snow cover through most of Kansas, Nebraska and eastern Oklahoma, while the Oklahoma Panhandle and southwest Kansas are left out, WSI Ag Trader said in a report. Cold temperatures "could be an issue" in areas where the ground is bare, the firm said.