January 16, 2009

 

US Wheat Outlook on Friday: Seen up 6-8 cents, following CBOT soy, corn

 

 

U.S. wheat futures should trail Chicago Board of Trade soybean and corn futures higher at the start of Friday's day session, with early calls reflecting overnight gains.

 

CBOT March wheat is called to open 6 to 8 cents per bushel higher. In overnight electronic trading, CBOT March wheat jumped 8 1/4 cents to US$5.77.

 

Wheat is a follower of the neighboring markets, a CBOT floor trader said. Soybeans are seen as the leader amid strong export demand and bullish concerns about dryness in Argentina.

 

"If beans break, we'll break," a wheat trader said.

 

Export demand for U.S. wheat has been poor lately amid stiff competition for business from countries in the Black Sea region, including Russia. More wheat from Argentina is expected to hit the world market, with traders speculating the Argentine government has begun to approve new crop exports, traders said.

 

Wheat could be preparing to make a breakout move after trading in relatively narrow ranges the last few sessions, an analyst said. Tight trading ranges in wheat "more often than not are precursors to an expansion of volatility," AgResource Company said in a market comment.

 

It seems as though concerns about winterkill in the U.S. are being discounted, an analyst said. Market participants had worried that bitterly cold weather in the Midwest would reduce yields, but it seems most areas have protective snow cover and should avoid significant damage, he said.

 

The coldest weather of the winter season to date and in several years is impacting the Midwest, according to DTN Meteorlogix. Some subzero temperatures in the non snow-covered areas of region "could have some impact on winter wheat but likely not a major impact," the private weather firm said.

 

In the central and southern Plains, warmer weather returns Friday and continues through next week, Meteorlogix said. More precipitation is needed in southwest areas to support the crop, the firm 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 technical analyst 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 Thursday's high of US$5.77 and then at US$5.90. First support lies at this week's low of US$5.60 1/2 and then at US$5.50.

 

Activity could be "slippery" and choppy with traders evening up positions ahead of the three-day weekend, a trader said. The CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange will be closed Monday for Martin Luther King Jr. Day.