March 11, 2009

Traders and analysts have mixed feelings about U.S. wheat futures Wednesday, with some looking for an open 2-4 cents higher while others call it 3-5 lower following updated supply/demand data.

 

In overnight electronic trading, CBOT May wheat added 2 1/4 cents to US$5.35 a bushel; July wheat gained 1 1/4 cents to US$5.46. Kansas City Board of Trade May wheat rose 1 cent to US$5.84 3/4. Minneapolis Grain Exchange May wheat ended flat at US$6.26.

 

U.S. wheat ending stocks for the 2008-09 crop year are estimated at 712 million bushels, according to updated supply and demand report released Wednesday by the U.S. Department of Agriculture. The average of trade estimates for stocks is 659 million bushels, up from the USDA's February estimated of 655 million bushels, according to a Dow Jones Newswires survey of 12 analysts.

 

"Wheat on its own is negative," a CBOT floor trader said. "World and domestic stocks are up, reinforcing the bearish view that there's plenty of wheat around."

 

He called wheat 3-5 cents lower.

 

Analyst Jerry Welch of Commodityinsite.com agrees the report is nothing but bad news for wheat. However, with soybean stocks cut to 185 million bushels - 15 million bushels lower than the average guess of 13 analysts polled by Dow Jones Newswires - and continued gains seen in equities, following the greatest 2009 rally in stocks posted Tuesday, Welch suggested that neighboring and outside markets might have the strength to lift wheat regardless of the stocks number.

 

He said he had seen opening calls for wheat up as much as 2-4 cents.

 

Technically, bears still have the near-term advantage with prices in a two-month-old downtrend on the daily 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 US$5.25 and then at this week's low of US$5.20.

 

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 this week's high of US$5.39 3/4 and then at US$5.44 3/4.

 

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

 

Wheat deliveries against the CBOT March contract totaled 180 lots. A customer account at Fortis Americas was the primary issuer at 165 lots. A customer account at the Astros Division of UBS stopped 159. The last trade assigned was March 9.