February 4, 2010

 

US Wheat Outlook on Thursday: Seen up in bounce, waiting for Egypt

 

 

U.S. wheat futures are expected to bounce Thursday after falling to fresh four-month lows Wednesday, with traders waiting to see results from an Egyptian tender.

 

Chicago Board of Trade March wheat is called to open 2 cents to 5 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 4 cents to US$4.73.

 

The markets are due for a recovery after tumbling Wednesday to their lowest prices since early October, traders said. They have been "oversold for quite a period of time" due to a steep slide during the past month, said Larry Glenn, broker and analyst at Frontier Ag.

 

"We got hammered so hard yesterday," he said. "I think we'll bounce back some."

 

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$4.75 and then at US$4.85, the technical analyst said. First support lies at Wednesday's low of US$4.68 1/4 and then at US$4.59, he said.

 

Large U.S. and world wheat supplies remain fundamentally unsupportive. Export demand for U.S. wheat has been lagging due to competition from other countries.

 

Total weekly U.S. wheat export sales of 482,700 tonnes were within trade expectations of 300,000 to 650,000 tonnes. Net sales of 418,200 tonnes for delivery in the 2009-10 marketing year, which ends at the end of May, were down 37% from the previous week and 5% from the prior 4-week average, according to the U.S. Department of Agriculture.

 

The export sales report "doesn't look like anything great," a broker said. Producers had been hoping for stronger demand following the steep drop in prices, he said.

 

Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, issued a snap tender for wheat after the close of trading Wednesday. Traders are keeping their eyes open for the results. Egypt, a major buyer on the world market, has been booking Black Sea wheat lately as U.S. wheat is seen as too expensive.

 

Wednesday's "big break in prices has stimulated demand as futures hone in on fall lows, with results from the latest snap tender by Egypt likely to sway early trading," Farm Futures said in an note.

 

In other export news, Japan said it bought 85,000 tonnes of wheat, including 65,000 tonnes from the U.S., in a routine tender. The wheat is expected to arrive April 1 to 13.