February 4, 2009

U.S. wheat futures are poised to start higher Wednesday in a rebound from losses supported by expectations for demand from Egypt.

 

Chicago Board of Trade March wheat is called to open 4 cents to 6 cents per bushel higher. In overnight electronic trading, CBOT March wheat jumped 3 3/4 cents to US$5.56 1/4.

 

Egypt's state-owned General Authority for Supply Commodities said Tuesday that it was tendering Wednesday to buy 55,000 to 60,000 metric tonnes of wheat on a free-on-board basis, for shipment March 1-10. GASC has purchased a cargo of U.S. SRW wheat as part of each of its past two tenders.

 

"I think we're still competitive," said Vic Lespinasse, analyst for grainanalyst.com.

 

Iraq issued a new tender Tuesday to buy at least 50,000 tonnes of hard wheat, the Grain Board of Iraq said in a tender document. The state-run Trading Corp. of Pakistan, meanwhile, bought 237,000 tonnes of wheat and 172,500 tonnes of wheat in two separate tenders.

 

Traders continue to monitor crop conditions in the U.S. Plains amid concerns about a lack of precipitation. The weather pattern over the southern Plains "appears to be changing" to allow for some significant rainfall in dry southwestern areas, DTN Meteorlogix said in a forecast.

 

The first chance for significant moisture comes Sunday, the private weather firm said. However, there appears to be additional chances during the six to 10 day period, it said.

 

In China, a series of drought alerts have been issued for northeast and central areas. Anhui provincial authorities issued a red alert for drought conditions Sunday as a lack of rain threatened close to 70% of its wheat crop, a statement on the China Meteorological Administration's Web site said Tuesday.

 

"Wheat should also open stronger this morning, with exports and weather in the news," Farm Futures analyst Bryce Knorr said.

 

CBOT March wheat bounced a bit off a technical support level around US$5.50, an analyst said. The contract on Tuesday closed slightly above its session low of US$5.51. Its open outcry low for the year is US$5.49.

 

"Once support at US$5.48 1/4 is taken out, we can look for further weakness targeting US$5.38 next, then US$4.89 and US$4.71," FuturesTechs said in a market comment.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at US$5.15, a technical analyst said. Bulls' next upside price objective is to push and close March futures prices above major psychological resistance at US$6.00, he said.

 

First resistance is seen at Tuesday's high of US$5.69 1/2 and then at US$5.80. First support lies at Tuesday's low of US$5.51 and then at the January low of US$5.48 1/4.