March 4, 2009

Technical buying and support from firm outside markets are expected to lift U.S. wheat futures at the start of Wednesday's day session.

 

Chicago Board of Trade May wheat is called to open 5 to 8 cents per bushel higher. In overnight electronic trading, CBOT May wheat gained 7 1/2 cents to US$5.09 1/4.

 

Wheat is "way oversold" and due for a bounce, a CBOT floor analyst said. The markets fell hard Monday and extended losses Tuesday.

 

Strength in equities and crude oil should help give wheat a boost, the analyst said. The grains continue to look to outside markets for direction amid jitters about the economy, he said.

 

"The macro markets are mostly firmer and quite simply corn, soybean and wheat futures are oversold by any technical measure with seasonal price trends turning up," AgResource Co. said in a market comment.

 

CBOT soybeans and corn were firmer overnight. Gains in the neighboring markets could spill over into wheat, traders said.

 

Traders continue to watch the weather in the U.S. central and southern Plains amid worries about a lack of moisture in hard red winter wheat areas. Forecasts do not include much chance for significant rainfall in dry areas during the next seven to 10 days, private weather firm DTN Meteorlogix said.

 

"Everyone has to recognize concern over the southern Plains winter wheat crop," Allendale said in a note. "However, until it comes out of dormancy, and market sees those key spring rains are not coming, the market is unlikely to get excited."

 

In other news, Argentine farmers and the government came to a partial accord on several trade issues, including wheat, after more than five hours of talks Tuesday. The agreements centered on providing farmers a minimum price for their wheat, loosening wheat export controls, and raising subsidies and export quotas on beef and dairy products, an official said. Talks on other issues are slated to continue next week.

 

Looking at technical charts, resistance for CBOT May wheat is seen at US$5.34 1/2 and at US$5.38, according to FuturesTechs. The price levels are "two big ones that would likely cap upside if a bounce was attempted, let alone the former support at US$5.15," the firm said.

 

"The market has a long way to go before we're bullish again," FuturesTechs said.

 

The next downside price objective for the bears is pushing and closing prices below solid technical support at US$4.84 1/4, another 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$5.44 3/4, he said.

 

First resistance is seen at Tuesday's high of US$5.13 and then at US$5.25, he said. First support lies at Tuesday's low of US$4.98 1/2 and then at US$4.90.