April 6, 2009

 

US Wheat Outlook on Monday: Seen up 7-10 cents on technical buying

 

 

Technical buying and weather worries are expected to boost U.S. wheat futures Monday following a strong close Friday.

 

Chicago Board of Trade May wheat is called to open 7 to 10 cents per bushel higher. In overnight electronic trading, CBOT May wheat jumped 8 1/2 cents to US$5.72.

 

The market had a "strong technical close" Friday, with CBOT May wheat ending at a six-week high, a CBOT trader said. Fund buying that helped support the rally Friday could return, he said.

 

"It looks like the funds are in buy mode," he said.

 

Non-commercial speculative funds were net short 40,698 contracts in CBOT wheat futures and options as of March 31, according to a supplemental Commitments of Traders reports from the Commodity Futures Trading Commission. The large short position is "supportive" to the market, a CBOT trader said.

 

Bulls' next upside price objective is to push and close CBOT May wheat above solid technical resistance at US$5.89 3/4, a technical analyst said. The next downside price objective for the bears is pushing and closing the contract below solid technical support at US$4.98 1/2, he said.

 

"The wheat bulls have recently gained solid upside near-term technical momentum," he said,

 

Neighboring CBOT corn and soybeans rose overnight, which could add to the bullish tone in wheat, a trader said. Outside markets are looking "subdued," with the dollar higher and crude oil slipping, a trader said. A firm dollar is usually seen as bearish because it makes U.S. grain less attractive to foreign buyers.

 

Although trading Monday is expected to be technically driven, fundamental concerns about unfavorable weather remain in the markets, an analyst said. Cold weather is threatening to harm U.S. winter wheat early in the week, he said.

 

Temperatures in the low 20s or upper teens may be damaging to any jointing hard red winter wheat in Kansas, Colorado and Nebraska, DTN Meteorlogix said in a forecast. Temperatures in the low to middle 20s may be damaging to jointing wheat in northwest Oklahoma and the northern Texas Panhandle, according to the private weather firm.

 

Some precipitation has fallen in western Nebraska over the last two weeks, but conditions are still very dry in many areas, according to a crop update from the University of Nebraska-Lincoln Extension. Much of the western Nebraska Panhandle has been particularly dry since last fall, it said.

 

"Without significant moisture soon, some Panhandle wheat may not survive long into the spring," the update said. "One benefit of recent cold weather is that it has slowed wheat growth and development and reduced plant water demand. "

 

The U.S. northern Plains may trend drier after recent heavy snowfall, improving conditions for early spring field work, Meteorlogix said. However, cold temperatures will slow this drying out process, the weather firm said.