March 20, 2009

 

US Wheat Outlook on Friday: Seen mixed in consolidation mode

 

 

U.S. wheat futures are expected to start mixed Friday, with some consolidation likely ahead of the weekend, analysts said.

 

In overnight electronic trading, Chicago Board of Trade May wheat slipped 3/4 cent to US$5.54 1/2 per bushel. CBOT July wheat, which represents the new crop, shed 2 cents to US$5.65 3/4.

 

It wouldn't be surprising to see traders book profits in wheat after gains earlier in the week, an analyst said. CBOT May wheat on Thursday closed at a fresh five-week high close.

 

The markets could trade both sides depending on activity in CBOT corn and soybeans and in outside markets, a CBOT floor analyst said. Wheat is "going to follow" corn and soybeans if they jump, he said.

 

The U.S. dollar is stronger, which is usually considered a bearish influence on the grains because it makes them less attractive to foreign buyers, an analyst said. A sharp drop in the dollar Thursday boosted grains, so there is room for the greenback to rebound, an analyst said.

 

The next downside price objective for the bears is pushing and closing CBOT May wheat below solid technical support at US$5.11 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$5.89 3/4, he said.

 

First resistance is seen at US$5.59 1/2 and then at US$5.75. First support lies at US$5.50 and then at US$5.37 3/4, he said.

 

Weather in the U.S. southern Plains remains the markets' primary fundamental focus, an analyst said. The hard red winter wheat belt needs rain after a dry winter.

 

Little, if any, significant precipitation is expected over the dry western portions of the belt during the next seven to 10 days, according to DTN Meteorlogix. Beneficial rainfall is expected in some eastern growing areas early next week, the private weather firm said in a forecast.

 

There is chatter about excessive wetness in North Dakota ahead of spring planting. Some flooding looks possible in the Red River Valley, traders said.

 

"Weather concerns are expected to hold wheat at current levels," Country Hedging said in market note. "Flooding expected to start in the Red River Valley and dry weather [is a factor] in the Plains for the emerging hard red winter wheat crop."

 

In other news, India's wheat output in the year to June 2009 is likely to exceed an earlier estimate of 77.8 million metric tonnes because of a late spell of rain and cooling of temperatures in some growing regions, an official said. Some areas in India's wheat basket have been affected by a fungal outbreak called yellow rust, but output is unlikely to be significantly affected, he said.