March 22, 2010

 

US Wheat Outlook on Monday: Seen mixed; short-covering may support

 

 

U.S. wheat futures are expected to start mixed Monday amid spillover pressure from losses in neighboring markets and the potential for support from technical short-covering.

 

In overnight electronic trading, Chicago Board of Trade May wheat edged up 1 cent, or 0.2%, to US$4.84 3/4 a bushel.

 

Wheat rose overnight despite losses in neighboring CBOT corn and soybeans. Wheat has been looking to the other markets for direction lately amid a lack of fresh news. Outside markets are sending bearish signals to the grains as the U.S. dollar is stronger and crude oil is falling.

 

Fundamental factors are unsupportive for wheat because global supplies are large and there is intense competition for export business. There was a lack of fresh news out overnight to change that storyline.

 

"The lack of export news overnight could limit the upside for the grains," said Brian Hoops, president of Midwest Market Solutions.

 

There is a potential for support from short-covering because non-commercial speculative funds hold a massive net short position in CBOT wheat. The funds increased their short position to 65,923 contracts as of March 16 from 58,799 contracts as of March 9, according to a supplemental report from the Commodity Futures Trading Commission.

 

"To me, we're just kind of still stuck in a range," said Larry Glenn, a broker and analyst at Frontier Ag. "Technically we're oversold on the charts. We're due for some kind of a bounce in this market to get us back closer to the higher end of the trading range."

 

The next downside price objective for the bears is pushing and closing CBOT May wheat prices below solid technical support at the contract low of US$4.72, a technical analyst said. The 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 Friday' high of US$4.90 3/4 and then at last week's high of US$4.98 1/4. First support lies at Friday's low of US$4.82 1/2 and then at the March low of US$4.75 1/2, the technical analyst said.

 

In other news, traders continue to look ahead to the U.S. Department of Agriculture's prospective plantings report, due out March 31. The report will include projections on plantings of U.S. hard red spring wheat, which farmers typically start seeding in the northern Plains in April.