April 2, 2008

 

US Wheat Outlook on Wednesday: Up on overnight, rebound from weakness

 

 

U.S. wheat futures are poised to start Wednesday's day session firmer on follow-through buying from the overnight and in a bounce from recent weakness, analysts said.

 

Benchmark Chicago Board of Trade May wheat is called to open 5 to 10 cents per bushel higher. In overnight electronic trading, CBOT May wheat jumped 9 cents to US$9.04.

 

Wheat futures are rising a bit after sliding this week on a bearish U.S. Department of Agriculture quarterly stocks estimate, analysts said. The markets are in an oversold condition and due for a rebound, an analyst said.

 

Strength in CBOT corn overnight is supportive for wheat, a CBOT trader said. Wheat has become a follower in the markets, he said.

 

There are also some bullish ideas that fresh demand could lend support to old-crop prices, an analyst said. There is chatter in the markets that Brazil may have booked a few cargoes of U.S. wheat and some lower-quality Canadian wheat, traders said.

 

Argentina, Brazil's top wheat supplier, is caught up in a protracted farmers' strike that is preventing exporters from delivering grain to port. Brazilian wheat supplies will likely last until June if Argentina delivers around 700,000 metric tonnes purchased late last year by Brazilian milling companies, a commodity market analyst said. If the wheat does not arrive, Brazil will increasingly have to turn to the more costly North American wheat market.

 

There are lingering concerns about persistent dryness in hard red winter wheat areas of the western U.S. Plains. Any significant precipitation in the region continues to favor the east for at least the next five days, DTN Meteorlogix said.

 

KCBT HRW wheat futures will continue to keep a weather premium in the market until a beneficial rain event in the dry western areas, a KCBT floor trader said.

 

In the eastern and southern Midwest, a wet weather pattern looks to continue, Meteorlogix said. The Delta region also looks to be very wet this week, with additional flooding likely along the rivers and through low fields, the private weather firm said.

 

The bulls' next upside price objective is to push and close CBOT July wheat, which represents the new crop, above solid technical resistance at US$9.60 1/2, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$9.00, he said.

 

First resistance is seen at Tuesday's high of US$9.31 1/2 and then at US$9.50. First support lies at US$9.00 and then at US$8.75.