January 19, 2010

 

US Wheat Outlook on Tuesday: Seen down 8-10 cents on technical pressure

 

 

Technical selling and pressure from other markets are expected to weigh on U.S. wheat futures early Tuesday amid continued bearishness about large supplies and poor demand.

 

Chicago Board of Trade March wheat is called to open 8 cents to 10 cents per bushel lower. In overnight electronic trading, CBOT March wheat sank 10 3/4 cents to US$4.99 1/4.

 

The contract's dip overnight was the first time it has fallen below US$5 since Oct. 12. The slide took it below technical support around US$5.05, a CBOT floor trader said.

 

Wheat should feel technical pressure after a poor weekly close Friday, traders said. CBOT March wheat on Friday finished down 58 1/2 cents for the week.

 

"Charts are pretty ugly," a CBOT trader said.

 

The next downside targets are US$4.96 1/2 and 4.87 3/4, according to FuturesTechs. Below those levels, the market "could really capitulate," the firm said in a note. To the upside, resistance is seen at US$5.25 1/2 to US$5.24 3/4.

 

Noncommercial speculative funds continue to hold a large short position in CBOT wheat, and traders will see how much shorter they can get, a CBOT broker said. The funds were net short 37,858 contracts as of Jan. 12, up from 34,185 contracts a week earlier, according to a supplemental Commitments of Traders report from the Commodity Futures Trading Commission.

 

Wheat is due for a rebound after recent losses, but it looks as though that will be tough given the poor technical performance, a trader said. Strength in the U.S. dollar encourages a bearish tone in the grains amid ideas that a firm dollar makes U.S. grains less attractive to foreign buyers, he said.

 

Competition for wheat export business on the world market is already fierce because there is an excess of wheat to go around, traders said. Export demand for U.S. wheat has sagged because it is too high priced to be competitive, they said.

 

Japan said it is seeking 111,000 tonnes of wheat, including 86,000 tonnes of U.S. wheat, in a routine tender to be concluded Thursday. The wheat is expected to arrive March 11 to April 10.

 

In other news, temperatures are expected to be above normal in the U.S. central and southern Plains, which means there are "no significant concerns" for dormant hard red winter wheat, according to private weather firm DTN Meteorlogix. Winter wheat can be damaged if it is uncovered by snow and exposed to the cold for too long.