April 1, 2009

 

US Wheat Outlook on Wednesday: Seen lower on profit-taking

 

 

Profit-taking is expected to pull U.S. wheat futures lower at the start of Wednesday's day session as the markets retreat from a late rally Tuesday.

 

Chicago Board of Trade May wheat is called to open 3 to 6 cents per bushel lower. In overnight electronic trading, CBOT May wheat dropped 7 cents to US$5.25 3/4.

 

"The rally yesterday was done in the last 10 to 15 minutes," said Larry Glenn, a broker and analyst for Frontier Ag. "I think we'll back off a little bit. We're going to open lower and maybe lose half of what we gained yesterday."

 

CBOT May wheat on Tuesday closed up 20 1/4 cents to US$5.32 3/4 a bushel. The rally was "overdone," a CBOT floor analyst said.

 

Wheat traded lower overnight on profit-taking and weakness in the energy and corn markets, according to Country Hedging. Losses in crude oil and equities would be a bearish influence on the grains, the CBOT floor analyst said.

 

Crop reports issued by the U.S. Department of Agriculture on Tuesday were seen as mostly neutral for wheat, although 2009-10 spring wheat plantings came in at the low end of trade estimates. Spring wheat could lose even more acres due to wet weather and flooding in North Dakota and Minnesota, Country Hedging said in a note.

 

Light snow or flurries are expected to develop in northern and western areas of the U.S. northern Plains, with a few showers in southern areas Friday, DTN Meteorlogix said in a forecast. Wetness will "delay early spring field work and planting, with some acreage possibly not getting planted," the private weather firm said.

 

"That's a problem up there," Glenn said about wetness. "It takes them a long time to dry out with those cool temperatures and everything. That'll be supportive."

 

In hard red winter wheat areas of the central and southern Plains, additional significant precipitation appears likely during the 10-day period following a blizzard during the weekend, Meteorlogix said. However, it is not certain whether the moisture will hit typically drier southwest growing areas, the firm said.

 

Ideas that U.S. wheat is priced too high to be competitive in the global export arena continue to hang over the markets, traders said. Egypt's state-owned wheat buyer Tuesday bought 85,000 metric tonnes of Russian wheat for shipment April 21-30 and none from the U.S.

 

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$5.63, he said.

 

First resistance is seen at Tuesday's high of US$5.34 and then at US$5.50. First support lies at US$5.25 and then at US$5.20.