March 24, 2009

 

US Wheat Outlook on Tuesday: Slightly lower after weak close Monday

 

 

U.S. wheat futures are poised to open lower Tuesday amid forecasts for rain in dry areas of the Plains and following a weak close Monday, traders said.

 

Chicago Board of Trade May wheat is called to open 2 to 3 cents per bushel lower. In overnight electronic trading, CBOT May wheat slipped 2 1/4 cents to US$5.47.

 

Traders continue to keep an eye on forecasts for rain in dry areas of the central and southern U.S. Plains, a CBOT floor trader said. Otherwise, there were no major developments overnight for the wheat markets, he said.

 

Expectations for rain in the region are seen as bearish, as hard red winter wheat plants need moisture following a dry winter, traders said. Some "significant precipitation" is possible on Thursday and Friday, including the dry western areas, private weather firm DTN Meteorlogix said in a forecast.

 

Wetness in the Plains could cause CBOT wheat to gain on Kansas City Board of Trade wheat a bit, a trader said. HRW wheat, used to make bread, is traded at the KCBT.

 

Minneapolis Grain Exchange wheat, meanwhile, could feel some support from excessive wetness in the northern U.S. Plains, where spring wheat is planted, a trader said. A combination of melting snow and significant precipitation will lead to serious flooding in the Red River Valley over the eastern Dakotas and northwest Minnesota, Meteorlogix said.

 

"Major delays in spring fieldwork can be expected," the firm said.

 

Outside markets are seen as a slightly bearish influence on the grains so far, traders said. In early market action, stock index futures were lower, while crude oil was down and the U.S. dollar index was higher. A firm dollar is seen as bearish because it makes U.S. wheat less attractive to foreign buyers.

 

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 Monday's high of US$5.63 and then at US$5.75. First support lies at Monday's low of US$5.45 and then at US$5.37 3/4.

 

Wheat had an unimpressive close Monday as it weakened late in the trading session, along with the neighboring CBOT corn and soybean markets, traders said. Firm outside markets could not help wheat hang onto its earlier gains, which illustrates that its fundamentals are weak, a broker said.

 

"May wheat on Monday closed weaker and nearer the session low after hitting a fresh six-week high early on," the technical analyst said. "Bullish 'outside markets' Monday - higher crude oil prices, a sharply higher U.S. stock market and a lower U.S. dollar - did not help wheat bulls. That's a bearish clue."

 

In other news, Japan said it won't hold its weekly wheat import tender this week but did not give any reason for the decision.