March 23, 2009

 

US Wheat Outlook on Monday: Seen higher on outside markets, weather

 

 

Supportive outside markets and weather concerns are poised to push U.S. wheat futures higher at the start of Monday's day session, analysts said.

 

Chicago Board of Trade May wheat is called to open 10 to 12 cents per bushel higher. In overnight electronic trading, CBOT May wheat was up 12 cents at US$5.62 1/4.

 

Expected gains in stocks should help boost grains as the markets await the formal unveiling of a plan designed to get private investors to take toxic debt off bank balance sheets, analysts said. Strength in CBOT soybeans and corn will add support to wheat after Argentine farmers launched a one-week strike to protest export taxes on grains, they said.

 

"I think there's enough economic stuff that's supportive to [wheat] that we're going to open where the night market's at," said Larry Glenn, broker and analyst for Frontier Ag.

 

Speculative funds are net short CBOT wheat, which offers some "technical fuel" to rallies, a CBOT trader said. Non-commercial speculative funds were net short 34,486 contracts as of March 17, according to a supplemental report from the Commodity Futures Trading Commission.

 

Worries about dryness in the U.S. central and southern Plains should help underpin wheat, Glenn said. It doesn't appear that drier areas in the west "received too much rain over the weekend," he said.

 

Still, there is some sense that the area of dryness is shrinking, a trader said. That could help apply some pressure to prices, he said.

 

"Some significant precipitation is possible on Thursday and Friday, including the dry western areas," private weather firm DTN Meteorlogix said in a forecast. "More precipitation is needed to support the developing crop in the west."

 

There is chatter about excessive wetness in parts of the U.S. northern Plains, where some spring wheat is grown, traders said. Heavy winter snowfall and rain could delay spring fieldwork in some areas, they 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. 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 Friday's high of US$5.61 and then at US$5.75. First support lies at Friday's low of US$5.41 and then at US$5.37 3/4, the analyst said.