February 26, 2009

Profit taking is expected to weigh on U.S. wheat futures early Thursday as the markets take back some gains from Wednesday.

 

Chicago Board of Trade March wheat is called to open 2 to 3 cents a bushel lower. In overnight electronic trading, CBOT March wheat fell 3 1/2 cents to US$5.21 1/4.

 

Wheat could extend its overnight retreat on follow-through selling, a trader said. CBOT March wheat Wednesday ended up 9 1/2 cents.

 

Short covering from speculative funds could help support prices, a trader said. Supportive worries about dryness in the U.S. central and southern Plains, meanwhile, should move more to center stage, a broker said.

 

"The region could use more rain even after the precipitation of last week," private weather firm DTN/Meteorlogix said. "Chances for significant moisture are fairly limited during the next 10 days."

 

China is also struggling with dryness in wheat areas, although it is not expected to become a significant importer of wheat, traders said. China has ample grain reserves in case of a short crop, analysts said.

 

The U.S. Department of Agriculture's weekly export sales report, issued Thursday, confirms China bought 50,000 tonnes of U.S. soft red winter wheat in the week ended Feb. 19. The business is "old news" and shouldn't ignite bullish demand ideas, traders said.

 

"It's all viewed as specialty purchases and not indicative of a trend," a CBOT floor trader said of China's U.S. wheat purchases.

 

Total weekly U.S. wheat export sales were seen as solid. Sales for delivery in the 2008-09 and 2009-10 marketing years were 577,900 tonnes, above trade estimates of 250,000 to 440,000 tonnes.

 

In other export news, Iran may have to import 4 million to 5 million metric tonnes of wheat in 2009 if the current drought in the country continues, its vice minister for agriculture said. The potential for imports that large is supportive for world values, a CBOT floor trader said.

 

Looking at technical charts, the next downside price objective for bears is pushing and closing CBOT May wheat below solid technical support at US$5, a market technician said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.49 1/2, he said.

 

First resistance is seen at US$5.39 3/4 and then at US$5.49 1/2. First support lies at US$5.25 and then at US$5.15 1/2.

 

CBOT May wheat on Wednesday closed at US$5.35 3/4. First notice day for March contracts is Friday.