January 15, 2009

 

US Wheat Outlook on Thursday: Two-sided trade possible, eyeing demand

 

 

Weak export demand should drag down U.S. wheat futures early Thursday, although the markets could trade both sides during the day session in choppy activity, traders said.

 

Chicago Board of Trade March wheat is called to open 3 to 5 cents a bushel lower. In overnight electronic trading, CBOT March wheat fell 2 3/4 cents to US$5.71 1/2.

 

Demand for U.S. wheat remains sluggish, with total weekly export sales of 167,900 tonnes seen as low, traders said. Analysts had expected export sales of 200,000 to 400,000 tonnes.

 

Sales of soft red winter wheat, traded at the CBOT, were negative, the U.S. Department of Agriculture said in a breakdown of weekly business. Egypt, for one, canceled an order for 60,000 tonnes, according to agency data.

 

Egypt's state-owned General Authority for Supply Commodities bought 55,000 tonnes of U.S. SRW wheat and 28,000 tonnes of Russian wheat in a tender. The U.S. lately has been struggling to compete with lower-priced wheat from countries in the Black Sea region, including Russia.

 

Wheat traders were "watching the results of the GASC wheat tender this morning to see if US SRW [wheat] prices have regained competitiveness," AgResource Co. said in a note.

 

In other export news, state-run Trading Corp. of Pakistan has invited bids to import around 150,000 metric tonnes of wheat to stabilize local prices and meet a local shortfall, an official said. Pakistan is likely to miss its wheat output target of 25 million tonnes in the financial year to June 2009 due to a shortfall in fertilizer availability.

 

Japan, meanwhile, bought 157,000 metric tonnes of wheat, including 90,000 tonnes from the U.S., in a tender. The business is routine and not seen as supportive to the markets, traders said.

 

Wheat could trade both sides during the session, as it did Wednesday, a CBOT trader said. Trading is expected to be choppy, and the markets could feel support if CBOT soybeans and corn rise, an analyst said.

 

CBOT wheat Monday ended near limit down, or 60 cents lower, on spillover pressure from limit-down corn and soybeans. The market rose slightly Tuesday and Wednesday.

 

"Prices continue to bounce off their lows of Monday and may be preparing to break out again if demand surfaces," Country Hedging said in a comment.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below major psychological support at US$5, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at last week's high of US$6.46 1/4, he said.

 

First resistance is seen at Wednesday's high of US$5.81 1/4 and then at US$5.90. First support lies at Wednesday's low of US$5.60 1/2 and then at US$5.50.

 

Traders are watching U.S. weather forecasts amid worries about the potential for winterkill damage to wheat that is not covered by snow. Some subzero temperatures in non-snow-covered areas of the southern Midwest could have "some impact on winter wheat but likely not a major impact," private weather firm DTN/Meteorlogix said.