March 16, 2009

U.S. wheat futures are expected to start higher Monday on weather worries and as part of a seasonal bounce, analysts said.

 

Chicago Board of Trade May wheat is called to open 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT May wheat jumped 5 1/4 cents to US$5.23 1/2.

 

Follow-through buying from the overnight should help lift wheat, traders said. CBOT corn and soybeans are expected to start higher, which could lend wheat some spillover support, they said. Weakness in the U.S. dollar is seen as friendly because it makes U.S. grain more attractive to foreign buyers, they said.

 

Gains in wheat would make sense from a seasonal perspective because the markets have a tendency to rise into the end of March and beginning of April, said Larry Glenn, broker and analyst for Frontier Ag.

 

"The seasonal tendency is to work higher," he said. "The moon's not even in sight, but I still think we could rally some here."

 

Concerns about dryness in the U.S. Plains continue to provide some underlying fundamental support, traders said. The hard red winter wheat crop needs rain as it is resuming growth after a dry winter.

 

"I see no significant rain during the five-day period," Joel Burgio, meteorologist for DTN Meteorlogix, said in a forecast. "However, the six-to-10-day period is more uncertain."

 

In the Midwest, where farmers grow soft red winter wheat, weather has not become a major concern yet. Any rain activity in the region during the next five to six days will tend to favor the east and south, Meteorlogix said.

 

The North China Plain, meanwhile, should be dry and very warm to hot during the first part of the week, Meteorlogix said. Rain is needed to continue to improve the outlook for crops, after very dry late fall and early winter weather, the firm said.

 

China's wheat prices in major producing areas were mostly stable in the week to Monday, with prices in some areas lower as supply increased. Wheat prices in Anyang in Henan province were at RMB1,840-RMB1,860 a metric tonne, almost unchanged from a week ago.

 

In other news, Syria said Monday it bought 200,000 metric tonnes of Russian wheat in a tender. It issued a tender for another 200,000 tonnes of soft wheat for shipment during July, August and September with a closing date of March 23.

 

Syria's purchase "wasn't a surprise," Glenn said. He said he "didn't see any other major export type" news from the weekend.

 

The next downside price objective for the bears is pushing and closing CBOT May wheat below solid technical support at US$4.98 1/2, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.44 3/4, he said.

 

First resistance is seen at Friday's high of US$5.27 3/4 and then at US$5.31.First support lies at US$5.15 and then at last week's low of US$5.06 1/2.