February 10, 2009

U.S. wheat futures are expected to start higher Tuesday on spillover strength from neighboring markets reacting to a friendly government crop report, traders said.

 

Chicago Board of Trade March wheat is called to open 3 to 8 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 1/2 cent to US$5.65 1/2.

 

Wheat is "going to get dragged along" to the upside by CBOT soybeans and corn, a CBOT trader said. The U.S. Department of Agriculture's February crop report was friendly to soybeans and corn and mostly neutral for wheat, traders said.

 

The USDA estimated 2008-09 wheat carryout at 655 million bushels, unchanged from the USDA's January estimate. The forecast was slightly above from the average of analysts' pre-report estimates, 649 million.

 

The USDA report contained "no big surprises" for wheat, Country Hedging said in a note. World wheat carryover for 2008-09 was estimated at 149.96 million tonnes, up from the USDA's January estimate of 148.4 million.

 

"The US/global wheat numbers were mostly unchanged, as expected," said Joe Vaclavick of for Advantage Grain/MF Global in Chicago.

 

The USDA pegged Argentina's wheat crop at 8.4 million tonnes, down from its January estimate of 9.5 million. Yields were affected by drought, traders said.

 

The agency left its forecast for China's crop unchanged at 113 million tonnes. Reports of drought in China's wheat areas have worried traders recently and helped underpin prices, analysts said.

 

Showers and rain of 0.10 inch to 0.60 inch developed through China's key wheat areas during the weekend. The crop will need more rain during the coming weeks to ensure favorable develop during the spring, private weather firm DTN Meteorlogix said.

 

In the U.S., periodic light to locally moderate precipitation "will help to recharge soil moisture for spring growth of wheat, especially through central and north areas," Meteorlogix said. The Plains have struggled with dryness this winter.

 

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 March futures prices above major psychological resistance at US$6.00, he said.

 

First resistance is seen at Monday's high of US$5.77 and then at US$5.90. First support lies at Monday's low of US$5.56 1/4 and then at US$5.50.