February 5, 2009

U.S. wheat futures are expected to start higher Thursday on follow-through buying from the overnight trading session and in a rebound from losses Wednesday.

 

Chicago Board of Trade March wheat is called to open 8 to 10 cents per bushel higher. In overnight electronic trading, CBOT March wheat jumped 10 cents to US$5.52 1/4.

 

Wheat is due for a bounce after closing lower for the past five day sessions, a trader said. CBOT and Kansas City Board of Trade March wheat on Wednesday set fresh lows for the year.

 

"I think we just saw a little bounce last night," said Tom Leffler, owner of Leffler Commodities. "It was light volume. I really didn't see any news out there."

 

Weekly U.S. wheat export inspections of 329,800 tonnes were within trade expectations, which ranged from 200,000 tonnes to 500,000 tonnes. The U.S. missed out Wednesday on business from Egypt, which bought wheat from France and Russia in a tender.

 

"Our export sales this morning weren't anything to brag about for wheat," Leffler said. "It was in the middle of the range, but you still can't get too excited about it."

 

In other export news, Syria's state-owned General Authority for Cereal Processing and Trade, or Hoboob, said it canceled a tender to buy 200,000 metric tonnes of soft wheat. It was the sixth time that Syria has canceled tenders to buy the same amount of soft wheat since December, citing unsuitable prices.

 

Japan, meanwhile, bought 128,000 tonnes of wheat, including 86,000 tonnes of U.S. wheat, in a routine tender concluded Thursday. The shipment is expected to arrive in April.

 

Concerns about dryness in wheat growing areas of the U.S. southern Plains and the North China Plain continue to attract attention, traders said. There is a chance for "significant moisture" in the Plains on Sunday and additional chances during the six- to 10-day period, private weather firm DTN Meteorlogix said in a forecast.

 

"I do know it is still dry in the southwest part of winter wheat country in the U.S., although we do have moisture coming this weekend," Leffler said.

 

Rainfall this spring in the North China Plain "may be more important than usual due to dryness that set in earlier in the fall," Meteorlogix said. Anhui provincial authorities issued a red alert for drought conditions Sunday as a lack of rain threatened close to 70% of its wheat crop, according to a statement on the China Meteorological Administration's Web site posted this week.

 

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 prices above major psychological resistance at US$6, he said.

 

First resistance is seen at Wednesday's high of US$5.62 and then at this week's high of US$5.71. First support lies at Wednesday's low of US$5.38 3/4 and then at US$5.25.