February 27, 2009

Worries about the economy and struggling outside markets are expected to pressure U.S. wheat futures at the start of Friday's day session.

 

Nearby Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT March wheat sank 3 1/2 cents US$5.10 1/2.

 

Weakness in equities and crude oil are bearish influences on the grains, traders said. Jitters about the global economic slowdown and "slackening demand for ag products could again weigh on prices," Farm Futures said in a note.

 

There is a lack of fresh fundamental news regarding wheat, so the outside markets will be a focus, traders said. Traders continue to watch the weather in the U.S. central and southern Plains amid ongoing concerns about a lack of moisture, they said.

 

Conditions are mostly dry in hard red winter wheat areas of the U.S. Plains, with eastern areas receiving "just a little light rain," private weather firm DTN Meteorlogix said. Temperatures are above normal to much above normal, the firm said.

 

Deliveries against the CBOT March wheat future on first notice day Friday were 3,909 contracts. That was within trade expectations of 2,000 contracts to 5,000 contracts.

 

In other news, 2009-10 U.S. wheat planted area is estimated at 58 million acres and production is seen at 2.12 billion bushels, the U.S. Department of Agriculture said Friday at its annual Agricultural Outlook Forum. The USDA projected wheat yields at about 43 bushels per acre.

 

In 2008-09, U.S. wheat planted area was 63.1 million acres, with harvested area at 55.7 million, according to the USDA. Production in 2008-09 was 2.5 billion bushels with a yield of 44.9 bushels an acre.

 

The estimated decline in acreage is not surprising. World wheat plantings and production are expected to drop following a decline in wheat prices.

 

Regarding demand, the USDA estimated U.S. wheat exports in 2009-10 will drop to 950 million bushels from the agency's estimate of 1 billion bushels for 2008-09. The U.S. has struggled to win business on the global market lately amid stiff competition from other exporters, such as Russia.

 

"There is very little bullish news around," Country Hedging said in a note.

 

Losses in wheat Friday would be an extension of weakness Thursday. However, the markets could find support from some short covering and position evening at the end of the week and end of the month, a trader 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. The 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$5.35 and then at US$5.40. First support lies at US$5.20 and then at last week's low of US$5.15 1/2. CBOT May wheat on Thursday closed at US$5.25.