March 18, 2010

 

US Wheat Outlook on Thursday: Seen down 4-8 cents on rallying US dollar

 

 

A rally in the U.S. dollar and profit-taking are expected to push U.S. wheat futures lower at the start of Thursday's day session.

 

Chicago Board of Trade May wheat is called to open 4 to 8 cents per bushel lower. In overnight electronic trading, CBOT May wheat tumbled 7 1/4 cents to US$4.88 3/4.

 

The markets fell as the dollar rose on renewed worries over Greece's debt problem, traders said. A firm dollar is often seen as bearish because of perceptions that it makes U.S. grains less attractive to foreign buyers and reduces investors' appetite for risk.

 

Wheat weakened overnight along with neighboring CBOT corn and soybeans. Losses in crude oil add to the negative tone, traders said.

 

"Wheat feels like a follower this morning," Country Hedging said in a note.

 

Wheat is due for a pullback after rising during the past two sessions, a CBOT floor analyst said. A dip in the dollar, technical buying and short-covering pushed up prices Tuesday.

 

"As long as the macro markets are weak, some selling in the grains is expected," AgResource Company said in a note. "However, we would not be surprised by a modest recovery effort back near unchanged. Heading into the end of the quarter and month, the wheat and soy markets are still too short."

 

Non-commercial speculative funds are heavily short in CBOT wheat, which leaves the market vulnerable to short-covering rallies. Funds that are short buy back, or cover, the previously sold positions when the net short position becomes too heavy or chart signals turn bullish.

 

Bears still have the overall near-term technical advantage in CBOT wheat, a technical analyst said. The market is in a four-month-old technical downtrend on daily charts, he said.

 

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, the 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 Wednesday's high of US$4.98 1/4 and then at US$5.00. First support lies at Wednesday's low of US$4.85 1/4 and then at US$4.80, the technical analyst said.

 

There is a lack of fresh fundamental news to rally prices, traders said. Total weekly U.S. wheat export sales of 439,300 tonnes were within trade expectations of 250,000 to 500,000 tonnes.

 

Weekly sales of U.S. soft red winter wheat, traded at the CBOT, were down 500 tonnes for delivery in 2009-10, a disappointing amount a CBOT floor trader described as "garbage." Foreign buyers seem to be continuing their trend of buying higher-quality hard wheat from the U.S. and not lower-quality SRW wheat.