February 12, 2010

 

US Wheat Outlook on Friday: Seen down 9-10 cents on global economy jitters

 

 

U.S. wheat futures are expected to fall early Friday on widespread commodity selling sparked by a rally in the U.S. dollar and a move by China to restrain bank lending.

 

Chicago Board of Trade March wheat is called to open 9 to 10 cents per bushel lower. In overnight electronic trading, CBOT March wheat dropped 9 1/2 cents to US$4.84.

 

Commodities took a hit overnight and the dollar climbed after China raised its deposit-reserve ratio for the second time this year. The move escalated worries about a potential slowdown in global economic growth and created concerns that China's commodity consumption could dip.

 

China does not import or export much wheat, but wheat futures are feeling spillover pressure from other markets, traders said. Wheat tumbled overnight with neighboring CBOT corn and soybeans and with crude oil and precious metals.

 

China's move added to ongoing worries about a lack of details for a bailout plan of debt-laden Greece by European leaders, an analyst said.

 

"China and the buck sideswiped us," a grain trader said.

 

Larger-than-expected U.S. wheat export sales should give the markets "a little stability" amid pressure from the outside influences, said Jerry Gidel, analyst for North America Risk Management Services. Total U.S. wheat export sales were 577,700 tonnes, above trade estimates for 250,000 to 500,000 tonnes.

 

Weekly U.S. wheat export sales of 548,200 tonnes for delivery in 2009-10 were up 31% from the previous week and 5% from the prior four-week average, according to the U.S. Department of Agriculture. The U.S. has seen export demand perk up slightly following a steep drop in prices, although there is still stiff competition for export business on the world market.

 

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$4.66 1/2, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at the December low of US$5.14 1/4, he said.

 

First resistance is seen at US$5.00 and then at this week's high of US$5.03, the technical analyst said. First support lies at Thursday's low of US$4.86 1/2 and then at US$4.80, he said.

 

CBOT March wheat on Thursday hit a session low of US$4.86. If the market fails "to retake US$4.86 on a weak open, the bears could very quickly seize the initiative and take us back down to US$4.66 1/2," according to a note from technical firm FuturesTechs. Below US$4.66 1/2, the next stop on any weakness is US$4.39 1/4, the firm said.