February 9, 2009

U.S. wheat futures are expected to start higher Monday on follow-through buying from the overnight and borrowed strength from firm Chicago Board of Trade soybean futures, traders said.

 

Chicago Board of Trade March wheat is called to open 5 cents to 10 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 9 3/4 cents to US$5.66 3/4.

 

Wheat should take its cue from overnight activity and start stronger, although trading could be "dicey," a CBOT floor trader said. Index funds are expected to continue rolling positions to the May futures contract from the nearby March contract, he said.

The markets will keep an eye on neighboring CBOT soybeans and corn for direction, an analyst said. There continue to be concerns about damage to Argentine soybeans and corn from hot, dry weather, he said.

 

There should be some positioning in the markets ahead of U.S. Department of Agriculture supply and demand reports due out at 8:30 a.m. EST Tuesday, an analyst said. The USDA will update its estimates for 2008-09 U.S. ending stocks and for global production.

 

Traders continue to watch weather forecasts for wheat in China and the U.S. Plains, areas that have been unfavorably dry. About 0.1 inch to 0.6 inch of moisture fell through key Chinese wheat areas during the weekend, which "will help to ease stress to crops after the dry weather pattern that began early in the fall," private weather firm DTN Meteorlogix said.

 

"The crops will need more rain during the coming weeks to ensure favorable develop of these crops during the spring," Meteorlogix said.

 

As of Feb. 7, 20 million hectares of arable land in China had been hit by drought, up 7.3 million hectares from a year earlier, according to the Office of State Flood Control and Drought Relief Headquarters. Crops have been planted on at least 10 million hectares, most of it wheat, it said.

 

In the U.S. Plains, rain through southwest and central areas helped recharge soil moisture, Meteorlogix said. More snow and rain is expected this week, although it may fall further north and east, the firm said.

 

In export news, there is chatter in the markets that Iraq bought 305,000 tonnes of non-U.S. wheat, traders said. The wheat may have been from Canada, Australia, Germany and Russia, they said.

 

Tunisia, meanwhile, said it bought 50,000 metric tonnes of soft milling wheat, on a cost-and-freight basis. The wheat is of optional origin and is for shipment in June.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at last week's low of US$5.38 3/4, a technical analyst said. Bulls' next upside price objective is to push and close the contract above major psychological resistance at US$6.00, he said.

 

First resistance is seen at US$5.67 1/2 and then at last week's high of US$5.71. First support lies at US$5.50 and then at US$5.41 1/2.