March 17, 2009

U.S. wheat futures are expected to start mixed Tuesday after slipping overnight in a slight setback from Monday's strong rally.

 

In overnight electronic trading, Chicago Board of Trade May wheat dipped 3/4 cent to US$5.43 1/2 per bushel.

 

Traders are waiting to see whether more technical-based buying comes in after the markets moved above resistance levels Monday, a floor trader said. If not, it looks as though there will be a profit-taking pullback, he said.

 

"Wheat could see profit taking on the open this morning, with the market trying to digest yesterday's big gains," said Bryce Knorr, analyst for Farm Futures. "The rally took futures to resistance levels at all three exchanges, also triggering some caution."

 

There could be some support from ongoing concerns about dryness in hard red winter wheat areas of the U.S. central and southern Plains, an analyst said. Conditions are expected to remain mostly dry through Saturday, although precipitation could be on tap after that, DTN Meteorlogix said in a forecast.

 

Analysts have said there is still time for wet weather to improve the condition of HRW wheat. Still, concerns about dryness have helped put wheat "in the grips of its first real weather trade," Knorr said in a market comment.

 

"Let's keep in the forefront of our minds that this is a real weather market that can last until the weather changes," said Mike Zuzolo, analyst for Risk Management Commodities.

 

In spring wheat areas of the northern Plains, there are worries about the potential for excessively wet weather to delay plantings of spring wheat, analysts said. A Farm Futures survey issued Tuesday estimated farmers are ready to plant 13.92 million spring wheat acres, down from 14.1 million in 2008. However, "that number could shift dramatically if expected severe flooding on the Red River Valley develops," Knorr said.

 

In other news, Japan said it is seeking 106,000 tonnes of wheat, including 85,000 tonnes from the U.S., in a routine tender to be concluded Thursday. The shipment is expected to arrive in May.

 

The next downside price objective for the bears is pushing and closing CBOT May wheat below solid technical support at the March low of US$4.98 1/2, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.75, he said.

 

First resistance is seen at Monday's high of US$5.46 1/2 and then at US$5.50. First support lies at US$5.30 and then at US$5.25.