March 2, 2010

 

US Wheat Outlook on Tuesday: Seen steady to higher, trying to bounce

 

 

U.S. wheat futures are expected to follow other markets Tuesday and start steady to slightly higher after sinking Monday.

 

Chicago Board of Trade May wheat is called to open flat to up 2 cents. In overnight electronic trading, CBOT May wheat edged up 1/4 cent, or 0.05%, to US$5.04 3/4.

 

Wheat will try to recover after ending more than 2% lower on Monday, a trader said. The markets have been caught in a "yo-yo" trade, alternating between higher and lower closes, for more than a week.

 

Activity in CBOT corn and soybeans and in the U.S. dollar should help give wheat direction, traders said. Corn and wheat are linked because both are used for animal feed. May corn overnight was up 1/4 cent, or 0.7%, and is called to start in line with wheat. Wheat has been keeping an eye on neighboring markets because it lacks a fresh fundamental story, traders said.

 

"Based on the market's reversal tendencies, wheat should recover some of [Monday's] losses, trading 10 cents higher at some point on Tuesday, still sensitive to outside influences and the dollar," Benson Quinn Commodities said in a note.

 

Short-covering has the potential to push prices higher because non-commercial speculative funds continue to hold a large net short position in CBOT wheat futures and options, traders said. However, large supplies and competition for export business are fundamentally unsupportive, they said.

 

Fresh demand news is scarce. Japan said it was seeking 132,000 tonnes of wheat, including 65,000 tonnes from the U.S., in a routine tender to be concluded Thursday for shipment April 16 to May 20.

 

During the weekend, Iraq bought wheat from Russia, Canada and Australia and none from the U.S. The purchases "underscored how competitive the marketplace remains, with more new crops coming on line every few months," Farm Futures said in a note.

 

The next downside price objective for bears is pushing and closing CBOT May wheat below solid technical support at the February low of US$4.80 3/4, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at Monday's high of US$5.26, he said.

 

First resistance is seen at US$5.10 and then at US$5.15. First support lies at US$5.00 and then at Monday's low of US$4.96 1/4, he said.