February 1, 2010

 

US Wheat Outlook on Monday: Seen up in slight rebound from weakness

 

 

U.S. wheat futures are poised to open a few cents higher Monday in a rebound from selloffs, with slight support seen from outside markets.

 

Chicago Board of Trade March wheat is called to open 1 to 2 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 2 1/4 cents to US$4.76 1/4.

 

Wheat is short-term oversold and due to bounce a bit after tumbling last week, traders said. CBOT March wheat on Friday finished down 24 1/2 cents on the week and 67 1/2 cents for the month.

 

Weakness in the U.S. dollar is seen as a "slightly positive" macro influence for the grains, a CBOT floor trader said. A soft dollar makes U.S. wheat more attractive to foreign buyers and can increase investors' appetitive for risk.

 

The U.S. continues to face stiff competition for export business from foreign countries. World wheat prices have eased in recent weeks as U.S. prices have weakened.

 

"The wheat market is still vulnerable to an upside correction if any positive export news is found," Benson Quinn Commodities said in a note. "Rallies are still meant to be sold until proven otherwise."

 

Non-commercial speculative funds hold a large net short position in CBOT wheat and are "shorter than expected," a trader said. That leaves the market vulnerable to some short-covering, although funds could still add on even more short positions, he said.

Speculative funds were net short 60,883 contracts in CBOT wheat futures and options as of Jan. 26, according to a Commodity Futures Trading Commission supplemental report. That was up from 46,930 contracts as of Jan. 19.

 

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 last week's high of US$5.04, he said.

 

First resistance is seen at US$4.80 and then at US$4.91 1/2, a technical analyst said. First support lies at Friday's low of US$4.73 and then at US$4.70, he said.

 

Looking at the weather, there are "no significant cold weather threats" for U.S. winter wheat in the Midwest or Plains, private weather firm DTN Meteorlogix said. A slow melting of snow in the southern Plains will provide beneficial soil moisture, according to a report from WSI AgTrader.