February 19, 2009

A moderate rise is expected from U.S. wheat futures on the open of Thursday's trading session.

 

Chicago Board of Trade March wheat is called to open up 3-4 cents. In overnight electronic trading, CBOT March wheat gained 3 3/4 cents to US$5.14 1/2 per bushel; May wheat added 3 cents to US$5.26. Kansas City Board of Trade March wheat gained 3 3/4 cents to US$5.50 1/4; May added 2 1/2 to US$5.57. Minneapolis Grain Exchange March wheat jumped 4 1/2 cents to US$6.24 1/2 per bushel; May rose 3 1/4 to US$6.06.

 

"We're just overdone and the outside markets are stabilizing," a CBOT floor broker said, noting wheat is ready to regain some of what it has lost since it began its most recent slide Feb 9.

 

"Corn, soybean and wheat prices are all consolidating near strike prices heavy with March options ahead of Friday's expiration," said Arlan Suderman, Farm Futures senior market analyst. "That provides some incentive to hold prices near those strike prices into expiration."

 

But, he added, "the predominant feature continues to be developments in the outside markets." While equities traders are not displaying much confidence in the economy, Suderman noted, "an industry survey of fund managers this week indicated that confidence is growing again that the world economy will turn the corner this year, led by China."

 

Suderman's colleague, Farm Futures Senior Editor Bryce Knorr said world markets are trying to stabilize Thursday after a brutal week. He pointed to the "safe havens," noting that the U.S. dollar and gold are retreating after investors rushed to buy them earlier in the week.

 

After closing at fresh two-month low, bears have the "overall near-term technical advantage" and have gained momentum this week with prices committed to 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 Wednesday's low of US$5.22 1/4.

 

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 Wednesday's high of US$5.30 1/4 and then at US$5.40.

 

In global wheat news, significant rainfall and snowfall in China's biggest wheat producing regions have helped ease areas under drought there to below multiyear average levels, the Office of State Flood Control and Drought Relief Headquarters said Thursday.

 

Wheat acreage hit by drought has been reduced to 3.78 million hectares in major producing provinces as of Thursday, the office said in a statement published on its Web site, compared with 4.65 million hectares Tuesday.

 

But Henan, the country biggest wheat producing province, which accounts for 27% of China's total wheat output, hasn't seen effective rainfall yet, it said.

 

As of Thursday, about 1 million hectares of wheat in the province are still under drought, 206,660 hectares of which are severely hit, said the office.

 

Japan bought 75,000 metric tonnes of U.S. wheat in a Thursday tender and Iraq issued a tender for at least 50,000 tonnes of hard wheat.