February 5, 2010

 

US Wheat Outlook on Friday: Seen weaker in retreat from gains

 

 

U.S. wheat futures are poised to start lower Friday in a setback from gains Thursday and with the markets continuing to lack a supportive fundamental story.

 

Chicago Board of Trade March wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT March wheat fell 3 1/2 cents to US$4.72 1/4.

 

The markets slipped overnight after ending higher Thursday in a bounce from fresh four-month lows. Activity is expected to be choppy Friday as traders wait to see the influence of fund money on the grains, an analyst said.

 

Technical charts look weak after recent sell-offs, and fundamentals are unsupportive, traders said. The market's trend is "inordinately downward sloping," said Dennis Gartman, publisher of the Gartman Letter.

 

As of Thursday's close, CBOT March wheat was down 96 3/4 from its close Jan. 11, the day before the U.S. Department of Agriculture issue bearish crop data. The wheat markets were caught up in general selling in grains and soybeans after the USDA issued the data.

 

"Wheat could see pressure on the open this morning after the market gave back some of yesterday's gains overnight," said Bryce Knorr, analyst for Farm Futures. "While beans and corn touched at least some psychological support, the wheat complex still has [autumn] lows beneath it to attract chart-based selling."

 

Traders have been looking at US$4.60 at a key support level for CBOT March wheat. The contract on Thursday hit a session low of US$4.66 1/2, its lowest price since Oct. 6.

 

Midwest Market Solutions said in a note that CBOT March wheat has support at US$4.71 1/2 and faces resistance at US$4.93. Futures Techs pegged the first support level at US$4.70 3/4 and saw resistance levels at US$4.92 1/2 and US$4.97 3/4.

 

"This market is undoubtedly depressed," FuturesTechs said in a note. "We'd need to see it up through bold resistance before changing skew."

 

Non-commercial speculative funds continue to hold a large short position in CBOT wheat, which makes the market vulnerable to short-covering. That helped support gains Thursday, a traders said.

 

Fundamentals for wheat are unsupportive because U.S. and world supplies are considered large. Export demand for U.S. wheat has been lagging, and there continues to be stiff competition for business.

 

Statistics Canada estimates all-wheat stocks as of Dec. 31 at 21.685 million tonnes, within trade estimates of 19.4 to 22.5 million. The stocks were down from 22.024 million a year earlier.