January 9, 2009

 

US Wheat Outlook on Friday: 6-8 cents higher on soybean spillover

 

 

Spillover support from an expected rally in Chicago Board of Trade soybean futures should lift U.S. wheat futures at the start of Friday's day session.

 

Chicago Board of Trade March wheat is called to open 6 to 8 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 7 1/2 cents to US$6.20.

 

Wheat is expected to follow soybeans higher as soybeans climb on concerns about dry weather in South American growing areas, traders said. Forecasts for Argentina look drier than they did Thursday, they said.

 

With soybeans in the lead, wheat will be "along for the ride," a CBOT floor broker said.

 

There should be some positioning in the markets ahead of the release of U.S. Department of Agriculture data at 8:30 a.m. EST Monday, traders said. The department will issue estimates on U.S. winter wheat seedings, crop production, carryout and quarterly stocks.

 

Projections for a sharp decline in plantings of soft red winter wheat could lend CBOT wheat a bit of support compared to Kansas City Board of Trade hard red winter wheat futures. HRW wheat is planted in the Plains and used to make bread, while SRW wheat is planted in the eastern Midwest and used to make pastries.

 

Farmers are expected to make a less significant reduction in HRW wheat acres than SRW wheat acres, according to a Dow Jones Newswires survey of analysts. SRW wheat is traded at the CBOT.

 

Traders continue to watch weather in SRW wheat areas of amid forecasts for an icy blast next week. Some areas lack protective snow cover, but may get more of a blanket by next week, meteorologists said.

 

Snow is forecast to fall Friday through the northern and northeastern Midwest and then to move southward toward the Ohio River Valley, according to private weather firm DTN Meteorlogix. Snow also is possible Monday and Tuesday, ahead of the "major Arctic outbreak," it said.

 

"Rain and snow are moving across the soft red winter belt in the eastern U.S., providing a little more snow cover ahead of a blast a cold next week," said Bryce Knorr, market analyst for Farm Futures. "Hard red winter wheat fields on the Plains should remain dry and bare, leaving them vulnerable if the cold reaches further west, though that appears less likely under today's models runs."

 

The Arctic high pressure system of the middle of next week is expected to skirt the central and southern Plains, Meteorlogix said. However, the system is "close enough to lead to subzero temperatures in wheat areas," the firm said.

 

Wheat areas of Ukraine and southern Russia have been "very cold" this week, with lows below minus 10 degrees Fahrenheit in some central and east areas, according to Meteorlogix. It appears snow cover has been enough to prevent widespread winterkill from occurring, it said.

 

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 March futures prices above solid technical resistance at this week's high of US$6.46 1/4, he said.

 

First resistance is seen at Thursday's high of US$6.20 3/4 and then at US$6.46 1/4. First support lies at Thursday's low of US$5.98 and then at US$5.84 3/4.