January 20, 2010

 

US Wheat Outlook on Wednesday: 6-8 cents down on weak technicals, firm dollar

 

 

Technical weakness and bearish signals from the rising U.S. dollar are expected to weigh on U.S. wheat futures early Wednesday as the markets extend their recent slide.

 

Chicago Board of Trade March wheat is called to open 6 cents to 8 cents per bushel lower. In overnight electronic trading, CBOT March wheat fell 6 3/4 cents to US$4.93 3/4.

 

Follow-through selling should weigh on the markets after a poor technical performance Tuesday, a CBOT trader said. The grains continue to feel pressure from bearish U.S. Department of Agriculture data issued last week, traders said. The government raised its forecast for 2009-10 U.S. wheat carryout and lowered its estimate for U.S. exports.

 

U.S. wheat export sales have sagged due to stiff competition for business from foreign countries. World wheat supplies are ample, and foreign countries are being "aggressive" to make sales, a trader said.

 

Saudi Arabia bought 440,000 metric tonnes of optional-origin wheat for March-May shipment in a tender this week, the head of the country's Grain Silos & Flour Mills Organization said. The country imported 1.9 million tonnes of wheat last year and is expected to buy about the same amount in 2010, he said.

 

"Both Saudi Arabia and Tunisia bought wheat on the world market and although origins weren't given, it appears U.S. wheat was priced too high to compete," Country Hedging said in a note. "U.S. wheat exports continue to struggle."

 

Exporters in Ukraine, meanwhile, have sold several hundred containers of feed wheat to Vietnamese buyers at a price of US$230 per tonne, basis cost and freight, a trading executive involved in the deal said. India purchased 200,000 to 300,000 tonnes of wheat from Australia between October and January, an industry executive said.

 

"There's a lot of wheat in the world," a CBOT trader said.

 

Strength in the U.S. dollar is adding to the bearish tone as it makes U.S. grains less attractive to foreign buyers, an analyst said. The dollar rose amid signals that China, a major buyer of commodities, is putting the brakes on economic growth. Solid Chinese growth has helped the global economy strengthen.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at the October low of US$4.59, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.38, he said.

 

First resistance is seen at Tuesday's high of US$5.15 1/4 and then at US$5.25. First support lies at Tuesday's low of US$4.96 1/2 and then at US$4.90.