January 20, 2009

U.S. wheat futures are poised to start mixed Tuesday as traders return from a three-day weekend to find little fresh news and conflicting signals from other markets.

 

In overnight electronic trading, Chicago Board of Trade March wheat slipped 1/4 cent to US$5.78 per bushel.

 

Wheat has been a follower of other markets and will continue to be so, a CBOT floor trader said. Expected gains in CBOT corn could provide spillover strength, although outside markets are providing a bearish influence, he said.

 

Crude oil is lower but paring losses a bit, traders said. Crude oil is linked to the grains because ethanol is made from corn and because funds often trade in a basket of commodities. The U.S. dollar is stronger, which is seen as bearish because it gives foreign countries less buying power, they said.

 

There is little fresh fundamental news out for wheat, traders said. Japan is seeking 157,000 tonnes of wheat, including 90,000 tonnes of U.S. wheat, in a routine tender to be concluded Thursday.

 

In other news, Philippine feed millers bought last week 40,000 tonnes of wheat from the Ukraine as a substitute for high-priced local corn, traders said. A group of livestock and poultry raisers this week will hold another tender to buy up to 100,000 tonnes of wheat, they said. Wheat and corn can substitute for each other as a major component in feed.

 

Looking at the weather, it seems as though concerns about potential winterkill damage in the U.S. Plains "have melted away," Country Hedging said in a market comment. Conditions in the region should be warm and mostly dry weather this week, private weather firm DTN Meteorlogix said.

 

"Colder weather may return during this weekend and early next week along with some light precipitation," Meteorlogix said in a forecast. "More precipitation is needed in southwest areas.

 

Some subzero temperatures in the non-snow covered areas of the southern Midwest late last week could have some impact on winter wheat but it likely won't cause major damage, Meteorlogix said.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at last week's low of US$5.60 1/2, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at the January high of US$6.46 1/4, he said.

 

First resistance is seen at Friday's high of US$5.84 3/4 and then at US$5.90. First support lies at Friday's low of US$5.68 and then at US$5.60 1/2.

 

Non-commercial speculative funds increased short CBOT wheat futures and options positives by 4,080 contracts, leaving them net short 20,770 contracts as of Jan. 13, the Commodity Futures Trading Commission said in a supplemental Commitments of Traders report. Index funds increased long CBOT wheat positions by 2,374 contracts and were net long 137,750 contracts, it said.