February 20, 2009

Negative macro-economic sentiment is expected to press U.S. wheat futures on the open of Friday's trading session.

 

Chicago Board of Trade March wheat is called to open down 5-7 cents.

 

In overnight electronic trading, Chicago Board of Trade March wheat shed 7 1/2 cents to US$5.12; May dropped 7 1/4 to US$5.23 3/4. Kansas City Board of Trade March wheat shed 10 1/4 cents to US$5.48; May dropped 3 1/4 to US$5.63 3/4. Minneapolis Grain Exchange March corn lost 4 3/4 cents to US$6.21 per bushel; May lost 4 1/4 to US$6.08.

 

Equities are seen moving lower, and crude oil is down more than US$2.

 

"We moved to the upside yesterday and did what we need to do [to establish support for wheat]; today the U.S. dollar's a little firm and there is a negative macro environment, we'll be going the other way," a CBOT floor broker said.

 

Export sales for the week ended Feb. 12 totaled 433,500 metric tonnes, or 15.9 million bushels. Analysts surveyed by Dow Jones Newswires expected export sales of 200,000-500,000 tonnes.

 

U.S. wheat exports so far this marketing year, which began in June, total 23.5 million tonnes.

 

Overseas competitor Ukraine has exported 15.2 million metric tonnes of grain since July 1, the agriculture ministry said Friday.

 

The exported grain included 7.793 million tonnes of wheat, 5.1 million tonnes of barley, 2.242 million tonnes of corn and nearly 70,000 tonnes of other grains.

 

In 2008, Ukraine harvested 53.3 million tonnes of grain, 82% more than in 2007.

 

"Brazil is trying to book a barter deal with Russia for 1 million MT of wheat. Brazil is forced to look at other origins after its traditional exporter, Argentina, lost its crop due to drought this past year," noted analyst Kevin Kjorsvik in a Benson Quinn Commodities commentary.

 

"Barter deals are usually hard to implement, but Brazil probably will book something out of the Black Sea in order to keep Western Hemisphere origins honest in their dealings, regardless," Kjorsvik added, noting currency weakness in Eastern European countries right now "will make it tough for U.S wheat to compete with them on export business."

 

The CBOT broker called Brazil's dealings with Russia "a negative" because it means the potential demand for U.S. product is reduced.

 

Despite a small rally in Thursday's trade, wheat bears maintain the "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 Thursday's low of US$5.22 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$5.35 and then at US$5.50.

 

In global grain news, India will review an existing ban on rice and wheat futures after assessing the country's foodgrain output estimates in May, a top government official said Friday.

 

India banned rice and wheat futures two years ago to check rising prices that were partly responsible for spiraling inflation to a record last year. The government keeps revising foodgrain output estimates as the crop year that runs from July to June advances. Latest official foodgrain estimates for 2008-09 put rice output 2% higher at 99 million metric tonnes compared with 97 million tonnes a year ago. Wheat output is estimated fall 1% to 77.8 million tonnes from 78.6 million tonnes in 2007-08.