March 15, 2010

 

US Wheat Outlook on Monday: Starting lower on weak corn, big supply

 

 

U.S. wheat futures are poised to start lower Monday on pressure from other markets and continued bearishness about large supply levels.

 

Chicago Board of Trade May wheat is called to start 1 to 2 cents per bushel weaker. In overnight electronic trading, CBOT May wheat dipped 1 cent, or 0.2%, to US$4.84 1/4.

 

Losses in neighboring CBOT corn and soybeans overnight and strength in the U.S. dollar are seen as bearish influences on wheat, traders said. Wheat has been a follower of corn lately amid a lack of fresh fundamental news.

 

The grains are linked because both are used for animal feed and because funds often trade in a basket of commodities. A firm dollar is often seen as bearish for the grains because of perceptions it makes them less attractive to foreign buyers and reduces investors' appetite for risk.

 

Global wheat ending stocks are large, and U.S. carryout is at a 22-year high. The U.S. continues to struggle to make export sales to price-conscious buyers because of stiff competition from countries in the Black Sea region and Europe.

 

In export news, the Grain Board of Iraq issued a tender to buy at least 100,000 tons of hard wheat from any origin. Bidders were asked to submit offers by March 28, and bids will be valid until April 4, the board said.

 

Iraq usually buys more wheat than it requests in tenders. It last issued a tender in February and purchased 380,000 tonnes of Russian and Canadian wheat.

 

"Unless there is a major shift in production expectations, the wheat market is expected to remain under pressure and to be increasingly influenced by corn," private analytical firm Informa Economics said. "The level of the corn market largely will determine the price floor for wheat based on its value as a feed grain as we move into the summer months."

 

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. 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 Friday's high of US$4.86 1/4 and then at US$4.92. First support lies at Friday's low of US$4.77 1/4 and then at US$4.72, the technical analyst said.