March 27, 2009

 

US Wheat Outlook on Friday: Seen lower, taking cue from overnight

 

 

Pressure from other markets and wet weather in the U.S. Plains are expected to weigh on U.S. wheat futures at the start of Friday's day session.

 

Chicago Board of Trade May wheat is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT May wheat dropped 4 1/2 cents to US$5.10.

 

Traders will likely take some money off the table ahead of the weekend and after a modest rally on Thursday, a CBOT floor analyst said. There could be some positioning as they look ahead to U.S. Department of Agriculture prospective plantings and quarterly stocks reports due out Tuesday, he said.

 

Traders continue to watch weather in the U.S. central and southern Plains hard red winter wheat belt, which has struggled with dryness. Precipitation, whether it falls as snow or rain, will help to improve soil moisture in some of the driest areas of the belt on Friday and Saturday, DTN Meteorlogix said.

 

"Wheat should see yesterday's gains evaporate on the open this morning, with weather news dominating the trade," said Bryce Knorr, analyst for Farm Futures. "A big spring snow storm is moving through the western Plains this morning, messing feedlots but bringing much-needed precipitation to dry wheat fields from Kansas into the Texas panhandle

 

Rain and snow falling on the HRW wheat crop "weighs heavily" on the markets following a dry winter, said Dennis Gartman, publisher of the Gartman Letter. The emerging crop needs moisture to grow.

 

In the northern U.S. Plains, where hard red spring wheat is planted, 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, Meteorlogix said. Major delays in spring fieldwork can be expected, the private weather firm said.

 

Weakness in outside markets is a bearish influence on the grains, traders said. A firm U.S. dollar adds pressure as it makes U.S. wheat less competitive on the global export market, they said. CBOT soybeans and corn were slipped overnight with wheat.

 

Saudi Arabia's state buyer is expected to tender Friday for 500,000 tonnes of wheat, with the business expected to go to Canada, Country Hedging said in a note. U.S. wheat is seen as too expensive to be competitive, although the U.S. has good quality wheat, traders said.

 

It's seen as supportive that non-commercial speculative funds remain net short in CBOT wheat, a trader said. The Commodity Futures Trading Commission is slated to issue its weekly Commitments of Traders report Friday afternoon.

 

The next downside price objective for the bears is pushing and closing CBOT May wheat below solid technical support at US$4.98 1/2, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.50, he said.