February 18, 2009

U.S. wheat futures are expected to slip on the open of Wednesday's trading session, then move into a two-sided trade if outside markets continue to stabilize.

 

Chicago Board of Trade March wheat is called to open down 5-7 cents. In overnight electronic trading, CBOT March soybeans lost 4 cents to US$8.99 cents per bushel; May soybeans lost 6 1/2 cents to US$8.98. Kansas City Board of Trade March wheat shed 4 3/4 cents to US$5.10 3/4; May dropped 4 3/4 cents to US$5.23 1/4. Minneapolis Grain Exchange March corn lost 1 cent to US$3.48 1/4 per bushel; May lost 1 1/4 cents to US$3.57 3/4.

 

"Traders will be watching the dollar today, after the greenback soared to new highs for the year yesterday on safe-haven buying," said Farm Futures Senior Editor Bryce Knorr in his Wednesday outlook.

 

Knorr noted investors "remain very nervous" about the strength of emerging market currencies around the world, especially in Eastern Europe.

 

"Wheat should follow the other markets, and that's probably lower on the open," Knorr said. "Futures broke key support at all three exchanges, a poor technical showing that could lead to more losses."

 

After an initial drop on the open, traders expect a two-sided trade given that wheat's losses are stretching into "overdone" territory, a CBOT floor trader said.

 

With outside markets showing signs of stabilizing after a brutal Tuesday, wheat will watch equities, the U.S. dollar, crude oil and neighboring markets for direction, the trader said.

 

"If the outside markets feel like stabilizing, they can help us stabilize," he said.

 

A dismal export outlook does nothing to support U.S. wheat.

 

Only 10.4 million bushels were inspected for export last week, according to data released Tuesday by the U.S. Department of Agriculture.

 

"Recently, optimism for US wheat exports was starting to creep into investors' mindsets," said Kevin Kjorsvik in a Benson Quinn Commodities commentary.

 

"Unfortunately, this optimism hasn't turned into exports and traders are ill prepared to stick with bullish ideals in the face of economic uncertainty," he said. "It will only be a short time before these traders turn sellers if they already haven't."

 

Adding to the negative export tone, Syria's state-owned General Authority for Cereal Processing and Trade, or Hoboob, said Tuesday it was tendering to buy 200,000 metric tonnes of soft milling wheat of Russian and/or Ukraine origin.

 

Syria has canceled tenders to buy the same amount of soft wheat six times since December, citing unsuitable prices.

 

After closing at fresh two-month low, wheat is subject to the bears' "overall near-term technical advantage" with prices in a six-week-old downtrend on the daily bar chart, a market technician said.

 

Bears are aiming to close May futures prices below solid technical support at US$5, he said, pegging first support at Tuesday's low of US$5.25 1/4 and then at US$5.00.

 

The bulls are pressing to close May futures prices above solid technical resistance at last week's high of US$5.89 3/4 a bushel, he said, placing first resistance at US$5.40 and then at US$5.50.

 

Weather issues in China and the hard red winter wheat-producing areas of the Western Plains continue to bear watching, but are not moving the market at present, traders said.

 

Questions about a major Canadian wheat concern's investing practices are broiling.

 

The Canadian Wheat Board is encouraging a further review of its risk management practices following questions regarding losses posted in its 2007-08 contingency fund.

 

"The 2007-08 crop year was unlike any seen in the history of grain markets," Larry Hill, chairman of the CWB's board of directors, said in a press release issued Tuesday.

 

The review also follows comments made by Canadian Agriculture and Agri-Food Minister Gerry Ritz, who is also the minister responsible for the CWB, and Parliamentary Secretary David Anderson. Anderson expressed outrage that the CWB lost C$130 million of farmers' money during the past two crop years.