January 14, 2010

US Wheat Outlook Thursday: Expected to start lower on spillover

U.S. wheat futures are poised to start lower Thursday on spillover pressure and ongoing bearishness about weak demand, with traders waiting yet again to see index fund buying at the close.

Chicago Board of Trade March wheat is called to open 2 cents to 4 cents per bushel lower. In overnight electronic trading, CBOT March wheat fell 4 cents to US$5.33.

Wheat is expected to slip with neighboring CBOT corn and wheat. Outside markets look mostly quiet, traders said.

The supply and demand story for wheat continues to look weak after the U.S. Department of Agriculture raised its projections Tuesday for U.S. and world ending stocks, an analyst said. U.S. winter wheat plantings were below trade expectations, but the large global supply makes it difficult for the market to become too bullish, he said.

Weekly U.S. wheat export sales of 181,900 tonnes were toward the low end of analysts' estimates, which ranged from 150,000 to 300,000 tonnes. Business was up 95% from the previous week, when export sales were at a marketing-year low, but down 29% from the prior four-week average, according to the USDA.

Japan, meanwhile, bought 91,000 tonnes of wheat, including 70,000 tonnes from the U.S., in a routine tender issued Tuesday and concluded Thursday. The wheat is expected to arrive March 16 to April 10.

In other news, German farmers are planting 2.8% more winter wheat for the 2010 harvest than they did for 2009, according to the German Federal Statistical Office. Producers will grow winter wheat on 3.27 million hectares, an increase of 90,000 hectares on the year, it said.

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at the December low of US$5.14 1/4, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at this week's high of US$5.75, he said.

First resistance is seen at Wednesday's high of US$5.38 and then at US$5.45. First support lies at US$5.30 and then at US$5.25.