January 22, 2010

 

US Wheat Outlook on Friday: Seen down, but exports look solid

 

 

U.S. wheat futures are expected to start lower Friday on pressure from other markets and follow-through selling from the overnight session, although strong weekly export sales could offer some support.

 

Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT March wheat fell 4 1/4 cents to US$4.95 1/4.

 

Wheat pulled back overnight amid pressure from outside and neighboring markets. Equities are expected to open lower after getting "rattled" by President Barack Obama's proposal to curtail banks' proprietary investing, a trader said. There are ideas the plan may mean less trading in commodities by funds that are associated, promoted, or financed by banks.

 

Trading in wheat could be two-sided as buying has emerged and underpinned prices at the close of trading for the past two sessions, a CBOT trader said. Volume is expected to be "subdued" as Fridays generally attract light trading interest in wheat, he said.

 

CBOT March wheat on Thursday closed higher after shaking off earlier weakness but settled just below US$5, a resistance level. That leaves "the door open for a ride all the way down to US$4.50, which would test multi-year trend line support on the charts," according to a note from Farm Futures.

 

The markets could find support from weekly U.S. wheat export sales of 825,800 tonnes for delivery in 2009-10, a marketing-year high. The sales were "up noticeably from the previous week and from the prior four-week average," the U.S. Department of Agriculture said. The U.S. also sold 60,500 tonnes for delivery in 2010-11.

 

Big buyers of U.S. wheat in the week ended Jan. 14 included the Philippines, which booked 187,600 tonnes, and Nigeria, which took 107,100 tonnes, according to the USDA. Analysts had been expected total sales to be within 200,000 to 400,000 tonnes.

 

It seems that the U.S. is "gradually pricing itself" into the world export market with recent sell-offs, a trader said. Still, U.S. soft red winter wheat prices remain too high to be competitive into major destinations like Egypt, a top buyer on the world market, he said.

 

"There's plenty of wheat around," he said.

 

The USDA last week raised its forecast for U.S. wheat ending stocks to a 22-year high, a hefty supply that continues to hang over the markets. The government cut its forecast for U.S. wheat exports due to competition from foreign countries.

 

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. The 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 US$5.10 and then at US$5.15 1/4. First support lies at Thursday's low of US$4.93 and then at this week's low of US$4.85 1/4.