January 14, 2009

 

US Wheat Outlook on Wednesday: Seen up 3-5 cents on spillover, weather woes

 

 

Weather worries and gains in neighboring markets should boost U.S. wheat futures at the start of Wednesday's day session.

 

Benchmark Chicago Board of Trade March wheat is called to open 3 cents to 5 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 4 1/2 cents to US$5.75 1/4.

 

Bitter cold in the U.S. Midwest is seen as supportive amid concerns it could damage soft red winter wheat that doesn't have adequate snow cover, traders said. The coldest weather of the winter season to date is expected through Friday, with low temperatures dropping to 10-20 degrees below zero Fahrenheit in the northern Midwest and 0-10 below zero in the south, private weather firm DTN Meteorlogix said.

 

Snow will provide some protection to winter wheat, Meteorlogix said. However, snow cover may be limited in southern areas, the firm said.

 

The hard red winter wheat belt in the U.S. Plains is expected to be on the western edge of the cold air affecting the Midwest, with any subzero cold likely confined to the belt's northeast fringes, Meteorlogix. More precipitation is needed in southwest areas, but conditions will be mostly dry, the firm said.

 

Wheat should feel spillover support from strength in the neighboring CBOT soy and corn markets, traders said. Soybeans, in particular, are expected to rise on ongoing concerns about dryness in Argentina, they said.

 

The demand picture continues to look weak for wheat, as U.S. wheat is priced too high to be competitive on the global market, traders said. Tunisia's state-run Office Des Cereales said it was tendering to buy 142,000 metric tonnes of optional origin wheat, on a cost and freight basis.

 

Syria's state-owned General Authority for Cereal Processing and Trade said it is tendering to buy 200,000 metric tonnes of soft wheat, on a cost and freight basis. Syria will probably buy French or Black Sea wheat, as opposed to the U.S. wheat, a CBOT trader said.

 

"We're not competitive," he said of U.S. wheat prices.

 

French 2008-2009 soft wheat production is expected to increase 21% on the previous year to 37.2 million metric tonnes, in line with December estimates, according to new data issued by L'Office National Interprofessionnel des Grandes Cultures. However, French wheat exports continue to suffer from competition in the Black Sea region, where prices are systematically lower, an official said.

 

"There's a lot of wheat around" in the world, a U.S. trader said.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below major psychological support at US$5.00, a market technician said. Bulls' next upside price objective is to push and close March futures prices above solid technical resistance at last week's high of US$6.46 1/4, he said.

 

First resistance is seen at Tuesday's high of US$5.90 and then at US$6.00. First support lies at Tuesday's low of US$5.61 and then at US$5.50.