February 24, 2010

US Wheat Outlook on Wednesday: Seen mixed after steadying overnight

U.S. wheat futures are called to start mixed Wednesday after ending near unchanged overnight, and expected to keep an eye on activity in other markets for direction.

In overnight electronic trading, nearby Chicago Board of Trade March wheat slipped 1/4 cent to US$4.91 1/2 a bushel. Most-active CBOT May wheat stumbled 1/2 cent to US$5.05 1/4.

Neighboring CBOT corn and soybeans were slightly higher overnight and could lend some spillover support to wheat, traders said. The markets influence each other because funds often trade in a basket of commodities and because corn and wheat are both used for animal feed.

A steady opening in wheat would come after it led the downside Tuesday in the grains and soybeans. CBOT May wheat on Tuesday tested psychological resistance near US$5.

Mark Gold, managing partner of Top Third Ag marketing, said CBOT May wheat needs to close above US$5.23 1/2 "to open the door to higher prices." The contract has support at US$4.92, he said.

Rallies are "worth selling into," technical analysis firm FuturesTechs said in a note. The firm said it was "still bearish" on wheat because strong resistance is above CBOT May wheat at US$5.21 1/4 to US$5.23 1/4.

Wheat lacks a bullish fundamental supply and demand story to underpin the markets, traders said. U.S. wheat is too expensive and "wholly uncompetitive in the world market," said Dennis Gartman, publisher of the Gartman Letter.

There is a lack of fresh news out overnight for the markets to digest, traders said. Japan is seeking 200,000 tonnes of feed barley and 30,000 tonnes of feed wheat for shipment by June 30, a government official said.

There are "no significant concerns" for U.S. soft red winter wheat or hard red winter wheat due to cold weather, according to private weather firm DTN Meteorlogix. Soil moisture "should be good" heading into the spring in most HRW wheat areas of the U.S. central and southern Plains, the firm said.