March 25, 2009

 

US Wheat Outlook on Wednesday: Down on US moisture, lack of demand news

 

 

U.S. wheat futures are expected to start lower Wednesday on forecasts for beneficial rains in the hard red winter wheat belt and a lack of fresh demand news, traders said.

 

Chicago Board of Trade May wheat is called to open 3 to 5 cents a bushel lower. In overnight electronic trading, CBOT May wheat sank 3 1/2 cents to US$5.31 1/2.

 

There appears to be significant promise of moderate to heavy precipitation in much of the driest wheat areas of the central and southern U.S. Plains within the next few days, DTN/Meteorlogix said in a forecast. More chances of moisture are seen later in the 10-day period, the private weather firm said.

 

"With improved weather across the Plains, weather premium will be diminished," AgResource Co. said in a market comment.

 

In the northern Plains, the combination of melting snow and significant precipitation will lead to serious flooding in the Red River Valley over the eastern Dakotas and northwest Minnesota, according to DTN/Meteorlogix. Major delays in spring fieldwork can be expected, the firm said.

 

There was an absence of fresh demand news out overnight, traders said. U.S. wheat continues to struggle on the world export market because it is priced too high compared to cheap supplies of abundant Russian wheat, AgResource said.

 

Fundamental factors, including weak export demand and precipitation in the Plains, are largely known to the markets already, said Vic Lespinasse, analyst for GrainAnalyst.com. In general, there is a rehashing of news going on, he said.

 

The grains could find some direction if outside markets like stocks and crude oil make strong moves, an analyst said. Neighboring CBOT corn and soybeans were lower overnight with wheat.

 

In other news, the Indian government is expected to lift a ban on wheat exports after the April-May federal elections, as there is no space to store the new crop currently being harvested, government and industry officials said. India, which is expected to produce about 78 million tonnes of wheat in the crop year to June 2009, is grappling with overflowing granaries, 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$5.63, he said.