January 15, 2010

US Wheat Outlook on Friday: Seen down 3-5 cents on large supply

U.S. wheat futures are poised to start lower Friday on pressure from large world supplies, with choppy, thin trading expected ahead of the weekend.

Chicago Board of Trade March wheat is called to open down 3 to 5 cents per bushel. In overnight electronic trading, CBOT March wheat fell 4 1/4 cents to US$5.23 1/2.

The markets are still feeling pressure from increases in the U.S. Department of Agriculture's estimates for U.S. and world wheat ending stocks, issued in crop reports Tuesday, traders said. Supplies are seen as comfortable, and export demand for U.S. wheat has been slow due to competition for business from foreign countries.

"The market's still reeling from the bearish report," a CBOT floor trader said.

Traders are not looking for a big trade Friday after sharp losses earlier in the week and ahead of a long weekend. CBOT March wheat was down 40 3/4 cents for the week as of Thursday's close. The CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange will be closed Monday for Martin Luther King Day.

There is a lack of fresh fundamental news for the markets, aside from the crop data issued Tuesday. The U.S. dollar is stronger, which is seen as a bearish influence for the grains because it reduces appetite for risk and makes U.S. commodities less attractive to foreign buyers.

The next downside price objective for 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.

A CBOT floor trader said CBOT March wheat has technical support in the area of US$5.15 to US$5.20. Below that, there is support in the area from US$5 to US$5.05, he said.