January 25, 2010

 

US Wheat Outlook on Monday: Seen up slightly as markets consolidate

 

 

U.S. wheat futures are expected to start a few cents higher Monday, in line with overnight gains.

 

Chicago Board of Trade March wheat is called to open 1 cent to 2 cents per bushel higher. In overnight electronic trading, CBOT March wheat edged up 1 1/4 cents, or 0.3%, to US$4.99 3/4.

 

Wheat is trying to enter a consolidation mode after falling during the past two weeks, traders said. The markets are due for a recovery and are trying to find their bottoms, an analyst said.

 

"After we've sold off so hard, we need to do kind of a basing action or a sideways trading before we can bounce back," said Larry Glenn, a broker and analyst at Frontier Ag. "We did a little of that on Thursday and Friday. I think we've done enough damage."

 

Wheat tumbled during the past two weeks after the U.S. Department of Agriculture on Jan. 12 raised its estimates for U.S. and world wheat ending stocks. CBOT March wheat as of Friday's close was down 76 1/2 cents, or 13.3%, from its Jan. 11 high.

 

Ending stocks remain large, but the USDA's weekly export sales report showed an improvement in demand. Export sales for delivery in 2009-10 were 825,800 tonnes, above trade expectations and a marketing-year high. Export demand has been sluggish for months due to competition for business from other exporters.

 

"We have to come to a price where it's a value to importing countries, but we need to stack up a couple strong weekly export sales reports to verify" an improved demand trend, Glenn said.

 

CBOT March wheat could attract some technical buying if it crawls above US$5.02, its Friday high, Glenn said. A move about that level could trigger some buy stops, he said.

 

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.

 

Resistance is seen at Friday's high of US$5.02 and then at US$5.10, the technical analyst said. First support lies at Friday's low of US$4.91 1/2 and then at last week's low of US$4.85 1/4, he said.