March 8, 2010

US Wheat Outlook on Monday: Up slightly on short covering, dollar

U.S. wheat futures are expected to open higher Monday due to short covering following recent losses. A weak dollar is lending support.

Chicago Board of Trade wheat is called 2 to 3 cents higher. In overnight trade, March CBOT wheat was up 2 3/4 cents to USUS$4.85 per bushel, while the May contract was up 2 cents to USUS$4.95 1/2.

Traders don't see dramatic moves in grains and oilseeds before the U.S. Department of Agriculture releases its supply and demand report Wednesday at 8:30 a.m. EST. Wheat climbed in overnight trade thanks in part to a weaker dollar, but wheat's fundamentals are far from supportive, analysts said.

Benson Quinn Commodities analyst Dave Lehl said in a commentary that while there are expectations the USDA will cut projected world wheat ending stocks in Wednesday's report, U.S. wheat prices are not competitive in the world market.

Ample world supplies of wheat and poor U.S. export demand have set the negative tone, analysts said. Technically, bears gained fresh downside momentum Friday, technical analyst Jim Wyckoff said.

The next downside price objective for the wheat futures bears is pushing and closing prices below solid technical support at the February low of USUS$4.80 3/4, he said. The bulls' next upside price objective is to push and close May futures prices above solid technical resistance at last week's high of USUS$5.26 a bushel.

First resistance is seen at USUS$5 and then at Friday's high of USUS$5.08 1/2, the technical analyst said. First support lies at Friday's low of USUS$4.92 1/4 and then at USUS$4.80 3/4.

Managed money accounts trimmed their CBOT wheat short positions in the week ended March 2, the Commodities Futures Trading Commission said Friday. The disaggregated commitments of traders report showed that managed money cut 3,201 contracts from its short positions and added 894 contracts to its long positions, leaving it net short more than 32,000 contracts.

In international news, Saudi Arabia's wheat production is expected to drop 30% to 700,000 metric tonnes in the 12 months ending June 2011, from one million tonnes in the previous period, the U.S. Department of Agriculture's Foreign Agricultural Service said Friday.