March 10, 2009

U.S. wheat futures are called to open 2-4 cents higher, buoyed by gains overnight and supportive outside markets.

 

In overnight electronic trading, CBOT May wheat added 2 3/4 cents to US$5.26 a bushel; July wheat gained 1 1/2 cents to US$5.36 3/4. Kansas City Board of Trade May wheat rose 3/4 cent to US$5.75 1/2. Minneapolis Grain Exchange May wheat added 2 1/4 cents to US$6.13 1/4.

 

"If the outsides firm, we'll go along for the ride," a CBOT floor trader said.

 

A lower U.S. dollar index, firmer crude oil futures and higher equities futures support the higher opening calls, the trader said.

 

In general, wheat is "overpriced on the world market" and lacks the fundamental drive to jump on its own, he said, calling wheat a follower of neighboring and outside markets.

 

Dry weather in the wheat-growing areas of the U.S. Southwestern Plains and China continues to be the primary fundamental concern in wheat markets.

 

"Mild temperatures have spurred growth from Kansas south," said Arlan Suderman, Farm Futures market analyst, in a market commentary. "Moisture supplies remain very low in these areas, allowing stress to build."

 

The dryness "is becoming more of a threat with each day that passes and a significant increase in rain will be needed to keep the wheat crop from suffering," he said.

 

While weather forecasts suggests central Texas will benefit from upcoming showers, "the major wheat belt from west Texas through central Kansas looks like it will miss out on substantial rains," Suderman said.

 

Market participants also await new agricultural commodities data from the U.S. Department of Agriculture, which is due to release an updated supply and demand report Wednesday at 8:30 a.m. EDT.

 

But the report is seen as a probable non-event for wheat, as analysts expect wheat stocks to remain about flat.

 

Technically, wheat faces an uphill battle, as a two-month-old downtrend still defines the CBOT daily wheat price bar chart, a market technician said.

 

Bears are aiming to close May futures prices below solid technical support at the contract low of US$4.84 1/4, the technician said, pegging first support at Monday's low of US$5.20 and then at US$5.11 3/4.

 

The bulls are pressing to close May futures prices above solid technical resistance at US$5.44 3/4 a bushel, he said, placing first resistance at last week's high of US$5.33 and then at Monday's high of US$5.39 3/4.

 

Wheat deliveries against the CBOT March contract totaled 290 lots. Customer accounts at Eagle Markets and Fortis Americas each issued 106 lots. A customer account at the Astros Division of UBS stopped 159. The last trade assigned was March 9.

 

In global trading news, stocks of Australian wheat surged to 14.5 million metric tonnes as of Dec. 31 from 1.5 million tonnes Sept. 30 as the annual harvest done mostly in the final calendar quarter wound down, the government's Australian Bureau of Statistics reported Tuesday.

 

In early March, the government's chief commodities forecaster, the Australian Bureau of Agricultural and Resource Economics, estimated national wheat production in the crop year ending March 31 at 21.4 million tonnes.

 

These figures suggest that more than one-third of the 2008-09 crop was being held on-farm, or elsewhere, at Dec. 31.

 

Japan's Ministry of Agriculture, Forestry and Fisheries is seeking 112,000 metric tonnes of wheat in a tender to be concluded Thursday, an agriculture ministry official said Tuesday.

 

The shipment calls for 70,000 tonnes of U.S. wheat, but it's nothing more than a "routine buy; nothing to get excited about," the CBOT trader said.

 

The trader also noted that Brazil made a test order of 25,000 metric tonnes of Black Sea wheat to fill in the gaps drought-stricken Argentina is unable provide.