January 28, 2010

 

US Wheat Outlook on Thursday: Seen steady-firmer after small bounce

 

 

U.S. wheat futures are expected to start steady to a slightly firmer Thursday as the markets try to recover from recent sharp selloffs.

 

In overnight electronic trading, Chicago Board of Trade March wheat gained 1 cent to US$4.84 3/4 per bushel.

 

Prices rose overnight after CBOT March wheat on Wednesday settled at its lowest price since Oct. 7. The markets are oversold and due for a bounce after tumbling during the past two and a half weeks, an analyst said.

 

Wheat advanced slightly overnight along with neighboring CBOT corn and soybeans. There could be some profit-taking by shorts in the grains heading into the weekend and ahead of the end of the month, which would provide support to prices, Country Hedging said in a note.

 

However, wheat continues to face headwinds from large supplies and concerns about demand. U.S. wheat ending stocks are at a 22-year high, and there is stiff competition for export business from other countries.

 

"Abundant supplies and sub-par demand are weighing on wheat," Country Hedging said. "Until U.S. wheat can maintain steady and hardy demand, prices will continue to struggle."

 

Total weekly U.S. wheat export sales of 689,200 tonnes were toward the high end of trade estimates, which ranged from 300,000 to 800,000 tonnes. Traders have been waiting to see the sales report amid hopes that the recent drop in prices attracted export demand.

 

A week ago, the U.S. Department of Agriculture reported that U.S. wheat export sales for the week ended Jan. 14 were a marketing-year high for wheat delivered in 2009-10. However, the U.S. did not win any business Wednesday in an Egyptian tender for wheat.

 

The snub from Egypt, a major buyer that is known for being price conscious, showed that U.S. wheat is still overpriced on the world market, a CBOT floor trader said. Egypt bought 180,000 tonnes from Russia in the tender.

 

In other export news, Japan bought 127,000 tonnes of wheat, including 86,000 tonnes from the U.S., in a routine tender issued Tuesday and concluded Thursday. The wheat is expected to arrive March 11 to April 10.

 

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 next upside price objective for bulls is to push and close the contract above solid technical resistance at this week's high of US$5.04, he said.

 

First resistance is seen at US$4.91 1/2 and then at Wednesday's high of US$4.95, the technical analyst said. First support lies at Wednesday's low of US$4.83 and then at US$4.75, he said.