March 17, 2010

 

US Wheat Outlook on Wednesday: Seen flat to up, taking cue from overnight

 

 

U.S. wheat futures are expected to start steady to slightly firmer Wednesday amid light support from outside influences, but traders said activity may be two-sided during the session.

 

Chicago Board of Trade May wheat is called to open unchanged to 2 cents per bushel higher. In overnight electronic trading, CBOT May wheat was up 1/4 cent at US$4.87 1/4.

 

Weakness in the U.S. dollar and gains in crude oil and precious metals are helping to create a positive tone for the grains, a CBOT floor analyst said. A soft dollar is often considered supportive because of perceptions it makes U.S. grains more attractive to foreign buyers and increases investors' appetite risk.

 

A drop in the dollar helped boost prices Tuesday, but trading could be more two-sided Wednesday because the dollar is making a quieter move, a CBOT floor trader said. Still, continued weakness in the dollar "will help the wheat market score a short term bottom and allow for a short covering rally to begin," according to a note from Benson Quinn Commodities.

 

CBOT wheat is vulnerable to bursts of short-covering because non-commercial speculative funds hold a large net short position in the market. A move above US$5 in CBOT May wheat should attract technical buying and accelerate gains, a floor trader said.

 

"With the dollar's weakness, wheat prices look to stabilize and climb into next week," Benson Quinn said.

 

Traders are looking ahead to the U.S. Department of Agriculture's prospective plantings report, due out March 31. It will provide the first estimates on U.S. hard red spring wheat acres.

 

Traders are uncertain about how much spring wheat will be seeded because of wetness in the northern U.S. Plains. However, there is still time before planting begins in April and May.

 

Other fundamental news looks unsupportive. Demand news is routine, and world supplies remain large, traders said.

 

India said it won't immediately lift a ban on wheat exports, but may review the decision in June after the federal government completes purchases of the grain from farmers. Federal wheat stocks as of Feb. 28 were 18.38 million tonnes, nearly double the country's buffer requirement for welfare programs.