February 10, 2010

 

US Wheat Outlook on Wednesday: Seen steady-higher after rising overnight

 

 

U.S. wheat futures are called to start steady to a few cents stronger Wednesday on short-covering and technical buying, although the markets could trade both sides.

 

In overnight electronic trading, Chicago Board of Trade March wheat rose 1 1/4 cents to US$4.83 1/2.

 

Short-covering could prop up prices as non-commercial speculative funds hold a large net short position in CBOT wheat, a trader said. However, wheat's fundamental storyline is unsupportive because world supplies are large and export demand continues to lag, analysts said.

 

The U.S. Department of Agriculture on Tuesday raised its forecasts for U.S. and world wheat supplies from January. U.S. wheat ending stocks have swelled to a 22-year high due to solid production and weak demand.

 

"Wheat's fundamentals remain bearish," Benson Quinn Commodities said in a note. "Rallies are still selling opportunities until proven otherwise. The fall lows remain wheat's downside objective."

 

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 US$5.04, he said.

 

First resistance is seen at this week's high of US$4.89 and then at US$5.00, the technical analyst said. First support lies at Tuesday's low of US$4.76 3/4 and then at last week's low of US$4.66 1/2, he said.

 

The U.S. dollar is a bit stronger, which is often seen as a bearish influence because it makes dollar-denominated commodities less attractive to foreign buyers. However, wheat fell Tuesday despite weakness in the dollar, so "even supportive outside influences may not be enough to generate a significant short-covering rally," Benson Quinn said.

 

In other news, cold weather in U.S. winter wheat areas will not be cold enough to harm plants, according to private weather firm DTN Meteorlogix. Moisture from an active winter storm track should favor early growth of hard red winter wheat in the central and southern Plains come spring, the firm said.

 

Japan, meanwhile, said it bought 105,000 tonnes of wheat, including 65,000 tonnes from the U.S., in a routine tender issued Monday and concluded Wednesday. The wheat is expected to arrive April 1 to 13.