March 11, 2010

 

US Wheat Outlook on Thursday: Seen down on overnight weakness, supply

 

 

Follow-through selling and bearishness about ample supplies are expected to weigh on U.S. wheat futures early Thursday, although an analyst said the markets appear technically oversold.

 

Chicago Board of Trade May wheat is called to open 1 to 2 cents per bushel weaker. In overnight electronic trading, CBOT May wheat dipped 1 3/4 cents to US$4.79 3/4.

 

The markets should take their cue from losses in the overnight session, which was not a high volume trade, a CBOT floor trader said. There is a lack of fresh fundamental news to digest and continued bearishness about U.S. wheat ending stocks, which are above 1 billion bushels and at a 22-year high.

 

"Any rallies should be sold into," a CBOT floor trader said.

 

Competition for export business on the world market remains fierce, which is not supportive, traders said. Egypt on Wednesday snubbed the U.S. in a tender and bought wheat from Russia and France. Egypt is known as a price-conscious buyer, and U.S. wheat is too expensive, traders said.

 

Weekly U.S. wheat export sales of 448,400 tonnes were "solid" and toward the high end of trade expectations of 200,000 to 500,000 tonnes. It seems buyers continue to look toward higher-protein varieties, such as hard red winter and hard red spring wheat, as opposed to lower protein soft red winter wheat, which is traded at the CBOT, a trader said.

 

In other news, Japan said it bought 152,000 tonnes of wheat, including 85,000 tonnes from the U.S., in a routine tender for delivery April 21 to May 20. The remainder of the wheat was from Canada and Australia.

 

Elsewhere, Kazakh farmers are expected to plant wheat on 14.3 million hectares for this year's harvest, up from 13.9 million hectares last year, the agriculture ministry said. U.K. wheat area, meanwhile, is up 11.4% on the year at 1.9 million hectares, according to the government.

 

Technical charts look "quite bleak" after a slide to five-month lows Wednesday, a trader said. Still, wheat prices "appear oversold and are due for a bounce," according to a note from Midwest Market Solutions.

 

The next downside price objective for bears is pushing and closing CBOT May wheat below solid technical support at the contract low of US$4.72, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.10, he said.

 

First resistance is seen at Wednesday's high of US$4.92 and then at US$5.00. First support lies at Wednesday's low of US$4.78 and then at US$4.72, the technical analyst said.