February 12, 2009

U.S. wheat futures in need of a fundamental impetus to rise saw decent weekly export sales and are expecting to open mixed in Thursday's trading session, awaiting the results of an Egyptian tender.

 

Chicago Board of Trade March wheat is called to open mixed. In overnight electronic trading, CBOT March wheat was 3/4 cents lower at US$5.42 1/2. Nearby wheat contracts also dropped at the Kansas City Board of Trade, but gained 1 3/4 to US$6.43 at the Minneapolis Grain Exchange.

 

Weak crude oil, a little firmer U.S. dollar and a stock market under pressure by dismal retail sales report add to the negative tone in the grains, a CBOT floor trader said.

 

"Export sales were pretty solid and we're waiting for results out of Egypt," a CBOT floor trader said.

 

U.S. wheat export sales totaled 16 million bushels for the week ended Feb. 5. Export sales for this marketing year trail last year's by 297.6 million bushels.

 

"Wheat could struggle to hold key chart support on the open this morning, leaving prices vulnerable to accelerating selling if recent lows fall," said Farm Futures Senior Editor Bryce Knorr in his Wednesday outlook.

 

"The U.S. has faced stiff competition into the Middle East, with French and Russian wheat dominating recent deals," Knorr said. "Most of the recent business has been to Asia, where the U.S. dominated today's regular weekly tender, which also included Canadian and Australian origins."

 

French wheat is likely to be unsuccessful in fulfilling the Egyptian tender for 55,000 - 60,000 tonnes of wheat, said a Paris-based broker. Russian wheat was offered at US$185/tonne-US$190/tonne while U.S. wheat was offered at US$191-US$192.50/tonne, the broker said. The tender's results are due later this session.

 

"Wheat bears still have the overall near-term technical advantage and gained more downside momentum Wednesday," a market technician said. "Prices are still in a five-week-old downtrend on the daily bar chart."

 

Bears are aiming to close March futures prices above solid technical resistance at this week's high of US$5.77 a bushel, he said, pegging first support at Wednesday's low of US$5.42 and then US$5.38 3/4.

 

The bulls press to close March futures prices above major psychological resistance at US$6 a bushel, he said, placing first resistance at US$5.50 and then at Wednesday's high of US$5.56 1/2.

 

Weather offers glimpses of supportive hope to wheat.

 

"Storms moving into the Midwest over the next week are forecast to again mostly bypass the dry southwest Plains, providing at least a little support to the market," Knorr said.

 

The continuing drought in China may cut winter wheat output by about 5% this year and could send wheat prices higher later on, a local agricultural consultancy firm said Thursday. Vice Agriculture Minister Wei Chaoan said earlier Thursday that as of the previous day, the drought was still affecting 40% of the winter wheat crop and future overall rainfall was also likely to be limited. But the Office of State Flood Control and Drought Relief Headquarters said irrigation reduced its estimate of drought-affected wheat crops to 2.26 million hectares, down by 65,300 hectares from Wednesday's estimate.