April 9, 2009

 

US Wheat Outlook on Thursday: Seen up on spillover strength, bounce

 

 

U.S. wheat futures are expected to open stronger Thursday on spillover support from other markets and in a rebound from recent sell-offs.

 

Chicago Board of Trade May wheat is called to start 5 to 10 cents per bushel higher. In overnight electronic trading, CBOT May wheat rose 5 cents to US$5.37.

 

Wheat should feel spillover strength from neighboring CBOT soybeans and corn following the release of the U.S. Department of Agriculture's April supply/demand report, a trader said. The report was seen as somewhat friendly for the row crops, he said.

 

The USDA report was mostly neutral for wheat, traders said. The government estimated 2008-09 wheat carryout at 696 million bushels, compared to the average of analysts' pre-report estimates of 697 million and the USDA's March estimate of 712 million.

 

Wheat "will take a me-too attitude, following corn and soybeans," said Don Roose, president of U.S. Commodities. Corn and soybeans were higher overnight.

 

Firm outside markets should lend additional strength to the grains, with gains in crude oil and weakness in the U.S. dollar looking supportive, a trader said. A soft dollar makes U.S. wheat more attractive to foreign buyers.

 

Wheat may try to bounce after closing lower for the past three days, a CBOT floor trader said. Minneapolis Grain Exchange wheat futures, in particular, could feel a boost from ongoing concerns that wetness will delay spring wheat planting in the northern U.S. Plains, he said.

 

A storm track appears to be south of the northern Plains, which may allow fields to trend drier, improving conditions for early spring field work, DTN Meteorlogix said in a forecast. Hard red spring wheat is valued for its high protein content and used to make bread.

 

In the southern Plains, there is uncertainty about the extent of damage from a freeze early Tuesday, traders said. Weekend rains over some of the driest areas of Texas and Oklahoma will help improve the condition of wheat in the region, Meteorlogix said. However, wheat lost due to the freeze may not recover in some cases, even with the rain, the private weather firm said.

 

"Wheat bulls have received no traction this week from freezing weather in the Plains states that could have damaged the U.S. wheat Crop," a technical analyst said. "Wheat bears have the overall near-term technical advantage."

 

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, he said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.72 3/4, he said.