March 6, 2009

Weakness in the U.S. dollar and strength in outside markets are expected to push up U.S. wheat futures at the start of Friday's day session, traders said.

 

Chicago Board of Trade May wheat is called to open up 3 to 5 cents per bushel. In overnight electronic trading, CBOT May wheat rose 4 1/4 cents to US$5.19 1/4.

 

A weaker dollar is seen as supportive because it makes U.S. wheat more attractive to foreign buyers. Gains in crude oil add to the bullish tone, and equities are expected to stabilize somewhat after jobs data came in about in line with expectations, traders said.

 

Activity in outside markets has given the grains direction throughout the week amid jitters about the economy. Losses in equities and crude oil dragged down wheat Thursday.

 

"The outside markets, they rule," said Vic Lespinasse, analyst for grainanalyst.com.

 

There was a lack of fresh fundamental news out for wheat overnight, CBOT traders said. Volume is expected to be light ahead of the weekend, they said.

 

Traders continue to keep an eye on weather forecasts for the U.S. Plains, where hard red winter wheat needs rain. Friday's outlook mentions "some chance for rain in the north Texas region at about next Wednesday," private weather firm DTN Meteorlogix said.

 

A strong, drying wind blew across the U.S. central and southwestern Plains Thursday, raising more concerns about crop conditions, said Drew Lerner, president of World Weather Inc. The situation was stressful for young winter wheat plants in unirrigated areas that were already dealing with low soil moisture, he said in a forecast.

 

In China, an earlier drought in major wheat growing areas won't have much of an impact on the country's full-year grain supplies, a senior government official said. The impact of the drought eased by the end of February, the Communist Party official said. About 40% of China's winter wheat was hit by the drought but recent rains eased dryness worries.

 

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

 

First resistance is seen at US$5.20 and then at US$5.28. First support lies at Thursday's low of US$5.11 3/4 and then at US$5.00.