February 23, 2009

U.S. wheat futures are poised to start higher Monday on spillover support from other markets and in a recovery from recent losses.

 

Chicago Board of Trade March wheat is called to open 5 to 7 cents per bushel higher. In overnight electronic trading, March wheat rose 7 1/4 cents to US$5.26 1/2.

 

Expected gains in CBOT corn and soybeans should help lift wheat at the opening bell, said Tom Leffler, owner of Leffler Commodities. March soybeans climbed 18 1/2 cents overnight, while March corn jumped 9 1/4 cents overnight.

 

The markets are due for some short-covering after recent sell-offs, a CBOT floor analyst said. CBOT March wheat last week closed down 16 1/4 cents on the week.

 

"With everything else being higher, I think it's going to help the wheat out," Leffler said. "We pulled the market down to where it has a little room to come back up."

 

During the weekend, Egypt's state-owned General Authority for Supply Commodities said it bought 240,000 metric tonnes of Russian wheat in a tender and none from the U.S. The purchase was on a free on board basis for shipment March 16-31, GASC said.

 

The U.S. was not expected to secure any business in the tender and export demand remains disappointing, Leffler said. Egypt, a major wheat buyer on the world market, is known for being price sensitive.

 

"The demand still isn't where it needs to be, so that's a drag on the market," Leffler said.

 

There is continued market chatter about dryness in hard red winter wheat areas of the U.S. Plains, traders said. There is also talk about the crop starting to come out of dormancy due to warm weather, Leffler said.

 

The Plains could use more rain even after precipitation last week, DTN Meteorlogix said in a forecast. Chances for significant moisture are fairly limited during the next 10 days, the private weather firm said.

 

Strength in crude oil is seen as supportive to the grains, traders said. The markets are monitoring news about U.S. bank bailouts, a CBOT floor analyst said.

 

The next downside price objective for the bears is pushing and closing CBOT May wheat below solid technical support at US$5.00, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at the February high of US$5.89 3/4, he said.

 

First resistance is seen at Friday's high of US$5.35 1/4 and then at US$5.50. First support lies at US$5.22 and then at Friday's low of US$5.15 1/2. CBOT May wheat closed Friday at US$5.30 1/2.