January 6, 2010

 

US Wheat Outlook on Wednesday: Seen up on overnight, fund anticipation

 

 

U.S. wheat futures are poised to start slightly higher Wednesday amid expectations for fund buying and in a bounce from weakness Tuesday.

 

Chicago Board of Trade March wheat is called to open up 1 to 2 cents per bushel. In overnight electronic trading, CBOT March wheat edged up 3/4 cent to US$5.53 3/4.

 

Traders are waiting for index fund buying that is expected to begin later this week as part of a rebalancing of positions. It's unknown how many contracts the funds will buy, if they put more money into the markets, but the heaviest buying is expected in corn.

 

CBOT corn was slightly higher overnight and is expected to start a bit firmer. Corn and wheat are linked because commodity funds often trade in a basket of products and because both grains are used for animal feed.

 

Wheat rose overnight after finishing modestly lower Tuesday. The losses Tuesday were a setback from a strong rally Monday linked to new buying at the start of the year.

 

"My gut tells me... that we may see some funds or some buying come back into this market," said Larry Glenn, broker and analyst at Frontier Ag. "It's like they got active and rested and maybe they'll get active again today."

 

Expectations for fund buying should underpin the markets until the U.S. Department of Agriculture issues a slew of crop data Jan. 12, Glenn said. Among other numbers, the government is slated to issue its first estimates on U.S. winter wheat plantings.

 

Plantings, particularly of soft red winter wheat, are thought to be down because wet, cold weather delayed the soybean harvest in the Midwest and South. Farmers were unable to plant SRW wheat until they took the soybeans out of the ground.

 

Hard red winter wheat acres in the Plains are expected to be more stable, Glenn said. The crop should not suffer from any damaging cold in the coming days, according to private weather firm DTN Meteorlgoix.

 

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 Tuesday's high of US$5.61 1/2 and then at US$5.70. First support lies at US$5.50 and then at this week's low of US$5.44.