US Wheat Outlook on Tuesday: Markets seen steady-down, eyeing demand

 

 

Chicago Board of Trade March wheat overnight dipped 1/2 cent to US$5.92 per bushel.

 

Wheat could feel some spillover pressure from losses in CBOT soybeans and corn, traders said. The row crops slipped overnight, but there are still bullish concerns about crop losses in Argentina due to drought, they said. Argentina's president on Monday declared that the country was suffering from an "agricultural emergency" brought on by the devastating drought.

 

"Wheat will try for a steady open today, after bucking late weakness in corn and soybeans again on Monday to post decent gains," Farm Futures analyst Bryce Knorr said.

 

Argentina's agricultural trade office, Oncca, is rejecting wheat export permits for 2008-09 to ensure domestic supplies, a person at the office said. The news helped support gains in U.S. wheat Monday, traders said, as export demand could shift to North America from Argentina.

 

"Brazil, Argentina's main wheat customer, may turn to the U.S. or Canada," Allendale said in a research note. "Soybeans are holding the grain pits up, and this Argentina news is good for a short-term bounce."

 

Export potential will be the fundamental driver of wheat markets in the near term, analysts said. Traders will look for signs of improving demand in the U.S. Department of Agriculture's weekly export sale report, due out Thursday.

 

Strength in the U.S. dollar is seen as a bearish influence on the markets, a trader said. A firm dollar gives foreign countries less buying power to import U.S. grain.

 

CBOT March wheat on Monday hit a two-week high before trimming gains. A sharp recent rally in gold "has raised the specter of commodity price inflation rearing its head again this year, and that's a bullish underlying factor," a technical analyst said. However, "bulls are still worried about a looming 'February break' seasonal phenomenon," he 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$5.48 1/4, the analyst said. Bulls' next upside price objective is to push and close prices above solid technical resistance at the January high of US$6.46 1/4, he said.

 

First resistance is seen at US$6.00 and then at Monday's high of US$6.11. First support lies at Monday's low of US$5.75 1/4 and then at US$5.57.

 

In other news, cold conditions in the U.S. Plains are not cold enough to harm wheat, DTN Meteorlogix said. The main concern for the hard red winter wheat crop is the dryness over southwest Kansas, Oklahoma and Texas, it said. There is little chance for improvement in the locations during the next 10 days, it said.