March 29, 2010

US Wheat Outlook on Monday: Seen up 2-4 cents, following other markets

U.S. wheat futures are expected to follow neighboring markets higher at the start of Monday's day session, although technical patterns look bearish.

Chicago Board of Trade May wheat is called to open 2 cents to 4 cents per bushel higher. In overnight electronic trading, CBOT May wheat rose 3 1/2 cents, or 0.8%, to US$4.68 1/4.

Prices rose overnight with CBOT corn and soybeans, which have been helping give wheat direction. The soft dollar is seen as supportive for the markets because of the perception it makes U.S. grains more attractive to foreign buyers and increases investors' appetite for risk.

Traders are expected to even up some positions as they wait for the U.S. Department of Agriculture to issue its prospective plantings and quarterly grain stocks estimates Wednesday. They also are waiting to see whether index funds liquidate positions heading into the end of the month.

"I think we'll just kind of tread water here for a couple days and then see what the numbers are and then see a lot of action on the last day of the month," said Larry Glenn, broker and analyst at Frontier Ag. "There are some concerns about index fund long liquidation. That's a possibility."

Technical charts looks bearish after the markets set contract lows Thursday and Friday, a trader said. The markets are "way oversold" technically but could stay in that condition for awhile, Glenn sad.

Non-commercial speculative funds increased their net short position in CBOT wheat futures and options to 67,185 contracts as of March 23 from 65,923 as of March 16, according to a supplemental report issued Friday from the Commodity Futures Trading Commission. The large short position leaves the market vulnerable to short-covering rallies.

The next downside price objective for bears is pushing and closing CBOT May wheat below solid technical support at US$4.50, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.00, he said.

First resistance is seen at Friday's high of US$4.68 3/4 and then at US$4.75. First support lies at Friday's contract low of US$4.64 and then at US$4.60, the technical analyst said.