March 19, 2010

 

US Wheat Outlook on Friday: Seen down 1-2 cents, watching dollar, corn

 

 

U.S. wheat futures are expected to start slightly weaker Friday and may trade both sides of even as traders keep an eye on activity in other markets.

 

Chicago Board of Trade May wheat is called to open 1 to 2 cents per lower. In overnight electronic trading, CBOT May wheat fell 2 cents to US$4.87 1/4.

 

Strength in the U.S. dollar and weakness in CBOT corn, crude oil and precious metals are contributing to a negative tone for wheat, a trader said. Wheat has been looking to other markets for direction lately because its fundamental storyline is well known.

 

The dollar is finding support from worries about Greece's debt problem, an analyst said. A strong dollar is often seen as a bearish influence because of the perception that it makes U.S. grain less attractive to foreign buyers.

 

"Wheat has certainly relegated itself to a follower," an analyst said. "It's following the dollar. It's following the other grains."

 

Volume has been thin in wheat on Fridays lately, so heavy trading is not expected, a CBOT floor trader said. Wheat will "see what the other markets want to do," he said.

 

CBOT May wheat is above its 10-day moving average at US$4.87 1/2. Closes above the 20-day moving average at US$4.98 1/4 are needed to help confirm that a short-term low has been posted, a technical analyst said.

 

If CBOT May wheat resumes this month's decline, October's low of US$4.72 is the next downside target, he said. First resistance is Wednesday's high of US$4.98 1/4, and second resistance is the 20-day moving average crossing at US$4.98 1/4, he said. First support is seen at US$4.75 1/2, and second support is seen at the contract low of US$4.72.

 

There is a lack of fresh fundamental news. Traders are waiting to see U.S. spring wheat, corn and soybean acreage estimates expected out from private analytical firm Informa Economics at 11:30 a.m. EDT. The U.S. Department of Agriculture is slated to issue its prospective plantings estimates March 31.

 

Spring wheat and durum producers are "watching their fields and calendars to guide their seeding decisions," said U.S. Wheat Associates, a trade group. In the northern plains, the immediate concern is flooding from rapid snow melt, especially along the Red River in eastern North Dakota and northwestern Minnesota.

 

U.S. weather conditions "are becoming more important by the day" for winter wheat as the crop breaks dormancy, according to U.S. Wheat Associates. Rain and snow during the next five days will maintain adequate-to-surplus available soil moisture for hard red winter wheat, private weather firm DTN Meteorlogix said.