January 29, 2009

U.S. wheat futures are poised to fall at the start of Thursday's day session on spillover pressure and weak export demand, analysts said.

 

Chicago Board of Trade March wheat is called to open 8 to 10 cents per bushel lower. In overnight electronic trading, CBOT March wheat sank 8 3/4 cents to US$5.86 1/2.

 

Expected losses in CBOT corn and soybeans should put pressure on wheat, traders said. The neighboring markets were lower overnight and continue to watch weather in Argentina amid concerns about drought, they say. Follow-through selling is expected in the grain markets.

 

Newedge USA said in a market comment it "can't see a reason that markets don't open in line with the overnight session."

 

Total weekly U.S. wheat export sales of -56,500 tonnes are "bearish," Country Hedging said in a note. Sales for delivery in the 2008-09 marketing year were 23,500 tonnes, a marketing-year low, according to the U.S. Department of Agriculture.

 

Previously-known cancellations of 356,000 tonnes of hard red winter wheat by Nigeria dragged down sales. Nigeria canceled purchases of 276,000 tonnes for delivery in 2008-09 and 80,000 tonnes for delivery in 2009-10.

 

Net sales of HRW wheat, traded at the KCBT, for delivery in 2008-09 were -248,100 tonnes, according to the USDA. Sales of soft red winter wheat, traded at the CBOT, for delivery in 2008-09 were 71,600 tonnes, up from 4,600 tonnes last week, the USDA said.

 

Traders are going to watch export sales next week to see whether there is a continuation of disappointing demand, an analyst said. Recent market chatter has indicated that U.S. wheat has become more competitive on the world export market due to firming values in areas like the Black Sea.

 

"We're going to have to watch for export sales next week," said Mike Zuzolo, analyst for Risk Management Commodities.

 

In other export news, Syria said it canceled and reissued a tender to buy 200,000 metric tonnes of soft wheat on a cost and freight basis due to unsuitable prices. Syria has canceled tenders to buy the same amount of soft wheat five times since December, citing unsuitable prices.

 

The markets will keep an eye on weather conditions in the U.S. plains amid concerns about dryness, Zuzolo said. There is "only a slight chance for some improvement" in precipitation in the region during the next eight to 10 days, private weather firm DTN Meteorlogix said.

 

"The main concern for the wheat crop is the dryness over southwest Kansas, Oklahoma and Texas," Meteorlogix said.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at the January low of US$5.48 1/4, a technical analyst said. Bulls' next upside price objective is to push and close March futures prices above solid technical resistance at the January high of US$6.46 1/4, he said.

 

First resistance is seen at US$6.01 and then at this week's high of US$6.11. First support lies at Wednesday's low of US$5.80 1/4 and then at this week's low of US$5.75 1/4.