February 25, 2009

U.S. wheat futures are poised to start higher Wednesday in a continuation of a technical bounce, although there is a lack of fresh bullish news, traders said.

 

Nearby Chicago Board of Trade March wheat is called to open 1 cent to 3 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 3/4 cent to US$5.16.

 

Wheat is due for a bit of a rebound after recent sell-offs, a CBOT floor analyst said. As of Tuesday's close, CBOT March wheat was down 52 3/4 cents in the month of February.

 

Still, there is the potential for wheat to move lower on economic gloom and ideas that U.S. wheat is priced too high to be competitive on the global export market, Fortis said in a comment. World demand has been solid lately, traders said, but the U.S. has failed to capture much of the business. Egypt and Syria recently booked Russian wheat in tenders and none from the U.S.

 

"Russian offers into the export market have been very aggressive lately causing many importers to overlook quality concerns," Country Hedging said in a note.

 

There is market chatter that Algeria may be tendering for 300,000 tonnes of wheat, traders said. Egypt's Ministry of Social Solidarity, meanwhile, is tendering to buy 210,000 metric tonnes of flour from local state-owned and private mills to cover its need for April, May and June, a trader said.

 

Traders will keep an eye on the stock market for reaction to a speech by President Barack Obama on Tuesday night, a CBOT floor analyst said. They also will watch the U.S. dollar and neighboring CBOT corn and soybeans for direction, traders said.

 

In other news, traders are starting to look ahead to the U.S. Department of Agriculture's Agricultural Outlook Forum, at which planting projections are set to be released Friday, an analyst said. First notice day for March contracts also is Friday.

 

"Amid a dearth of fresh ag news, it's the rolling out of March contracts ahead of first notice day which will dominate today's trade," AgResource Company said in a note.

 

Ongoing dryness in the U.S. central and southern Plains continues to attract attention, AgResource said. Little significant rain is expected in hard red winter wheat areas for the next 10 days, according to private weather firm DTN Meteorlogix.

 

"If a soaking rain does not fall in March, HRW yield prospects will decline," AgResource said. "The lack of moisture in the forecast and funds being heavily short may provide the right fodder for a rally in the next few weeks."

 

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 last week's high of US$5.49 1/2, he said. CBOT May wheat on Tuesday closed at US$5.26 1/4.

 

First resistance is seen at Tuesday's high of US$5.28 and then at US$5.35. There is support at US$5.15 1/2, he said.