January 7, 2009

 

US Wheat Outlook on Wednesday: 5-7 cents lower on profit-taking, pullback

 

 

U.S. wheat futures are expected to start weaker Wednesday as the markets pull back from strong recent rallies.

 

Chicago Board of Trade March wheat is called to open 5 to 7 cents per bushel lower. In overnight electronic trading, CBOT March wheat fell 7 3/4 cents to US$6.36 3/4.

 

Gains in wheat have been "overdone" and the markets are due for a correction, a CBOT broker said. As of Tuesday's close, CBOT March wheat was up more than US$1.70 from its Dec. 5 low of US$4.71.

 

Expected losses in the neighboring CBOT corn and soybean markets should add to the bearish tone in wheat, traders said. Wheat has been looking to neighboring and outside markets for direction lately, they said.

 

The U.S. dollar is weaker, which is normally seen as supportive for wheat because it makes U.S. grains more attractive on the world market. Still, calls point to a lower start for the markets, traders said. Wheat rallied Tuesday despite strength in the U.S. dollar, which is normally seen as bearish.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at last week's low of US$5.84 3/4, a technical analyst said. Bulls' next upside price objective is to push and close the contract above major psychological resistance at US$7.00, he said.

 

First resistance is seen at Tuesday's high of US$6.45 and then at US$6.50. First support lies at US$6.25 and then at Tuesday's low of US$6.11 1/2.

 

"Bulls have gained solid upside near-term technical momentum recently as a four-week-old uptrend is in place on the daily bar chart," the technical analyst said. "Large speculative fund traders appear to be moving back to the long side of the commodities markets."

 

Traders continue to wait for the results of a tender Saudi Arabia reportedly issued for high-protein wheat, a broker said. It would be supportive if Saudi Arabia bought some U.S. wheat, although there is competition from other exporters, including Canada, he said.

 

In hard red winter wheat areas of the U.S. central and southern Plains, there are no significant cold weather threats for the next week, private weather firm DTN Meteorlogix said in a forecast. Fast-moving low pressure systems will bring periodic light precipitation to soft red winter wheat areas of the Midwest during the next five to seven days, the firm said.

 

SRW wheat areas of the eastern and southern Midwest may turn "much colder later in the period," Meteorlogix said. Wheat that isn't covered by a protective blanket of snow could be damaged if temperatures fall well below zero degrees Fahrenheit.