February 3, 2010

 

US Wheat Outlook on Wednesday: Seen starting mixed, watching money flows

 

 

U.S. wheat futures are expected to start mixed Wednesday after trading both sides overnight and ending slightly lower in a retreat from double-digit gains Tuesday.

 

In overnight electronic trading, Chicago Board of Trade March wheat ended down 1/2 cent at US$4.86 3/4 a bushel.

 

The grains felt pressure toward the close of the overnight session from weakness in crude oil and gold and strength in the U.S. dollar, traders said. A firmer dollar is often seen as bearish because it makes U.S. wheat less attractive to foreign buyers and reduces investors' appetite for risk.

 

The dip overnight for wheat followed a rally Tuesday that was encouraged by fund buying, a CBOT floor trader said. The markets will be watching to "see if we get the same catalyst today," he said. CBOT wheat continues to be vulnerable to short covering because non-commercial speculative funds are net short more than 60,000 contracts, he said.

 

The supply and demand storyline for wheat continues to look weak, traders said. U.S. supplies are large, and there is stiff competition for export demand on the world market.

 

Jordan said it bought 100,000 tonnes of wheat for delivery in May. The wheat was likely from the Black Sea region and not the U.S., a trader said.

 

There is talk that Iraq may announce a purchase of wheat this week and that it could include some U.S. hard red winter wheat. However, the markets aren't getting too excited about the chatter because conditions in Iraq make it difficult to know when the business was actually done, a trader said.

 

Kansas City Board of Trade hard red winter wheat futures on Tuesday posted more modest gains than CBOT soft red winter wheat futures. That was because fund money was more active in Chicago than Kansas City, a trader 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. The 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 Tuesday's high of US$4.92 1/2 and then at US$5.00, a technical analyst said. First support lies at US$4.80 and then at this week's and last week's low of US$4.73, he said.