February 24, 2009

 

U.S. wheat futures are poised to start lower on follow-through selling, pressure from outside markets and a lack of fresh bullish news.

 

Nearby Chicago Board of Trade March wheat is called to open 2 cents to 4 cents per bushel lower. In overnight electronic trading, CBOT March wheat shed 3 3/4 cents to US$5.06 3/4.

 

Wheat should open lower with neighboring CBOT corn and soybeans, as all the markets slipped overnight, traders said. Worries about the struggling economy are looming over the markets and keeping bulls on the sidelines, said Bryce Knorr, Farm Futures market analyst.

 

"Attempts to rally the grain market could be put on hold this week, with traders continuing to look over their shoulder to Wall Street and Washington," he said in a note.

 

Strength in the U.S. dollar puts pressure on grains because it makes U.S. commodities less attractive to foreign buyers, traders said. Export demand for U.S. wheat has been seen as disappointing lately, with Egypt booking Russian wheat in a tender during the weekend and snubbing the U.S.

 

Syria's state-owned General Authority for Cereal Processing and Trade said Tuesday it bought 200,000 tonnes of Russian wheat in a tender. Japan, meanwhile, said it won't hold its weekly wheat import tender this week but didn't give a reason for the decision.

 

"Soft demand will continue the pressure on wheat prices as exports are light and domestic buyers are slow to make large wheat purchases," Country Hedging said in a market comment. "There is very little bullish sentiment in the market."

 

Paris wheat futures traded lower Tuesday, in line with weaker sentiment across equity and commodity markets. Competitively priced Russian and Ukraine wheat continues to undercut the rest of the international market, a London-based broker said.

 

CBOT May wheat Monday closed down 9 cents at US$5.21 1/2, near its session low of US$5.21. The next downside price objective for bears is pushing and closing the contract below solid technical support at US$5.00, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at last week's high of US$5.49 1/2, he said.

 

First resistance is seen at US$5.25 and then at US$5.35. First support lies at Monday's low of US$5.20 and then at last week's low of US$5.15 1/2.

 

In other news, traders continue to watch weather forecasts for the U.S. Plains amid lingering concerns about dryness in hard red winter wheat areas. Chances for significant moisture are fairly limited during the next 10 days, private weather firm DTN Meteorlogix said.

 

In the North China Plain, which also has struggled with dryness, an active weather pattern has been producing "significant rainfall through major rapeseed and southern wheat areas during the past week to 10 days," Meteorlogix said. A new system has produced some light precipitation over the North China Plain during the past 24 hours, the firm said. The condition of wheat crops should improve under the latest pattern, it said.