April 15, 2009

 

US Wheat Outlook on Wednesday: Seen 3-5 cents up on CBOT soy, short-covering

 

 

Technical buying and spillover support from Chicago Board of Trade soybeans are expected to boost U.S. wheat futures at the start of Wednesday's day session.

 

Chicago Board of Trade wheat is called to open 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT May wheat rose 3 3/4 cents to US$5.26 and CBOT July wheat gained 3 1/2 cents to US$5.37 1/2.

 

Wheat should feel some borrowed strength if soybeans climb, traders said. Soybeans are supported by strong Chinese demand and worries about crop losses in Argentina.

 

"All eyes remain on the soybean market, which is the big story in the commodity trade," Farm Futures said in a market comment. "Outside markets aren't providing much in the way of direction - or headwinds - this morning."

 

Short-covering could help support wheat in early dealings, as non-commercial speculative funds hold a large net short position in CBOT wheat, an analyst said. The fundamental storyline for wheat continues to look weak, with world supplies seen as ample, he said.

 

The "only bullish factor is the structural short in Chicago wheat that is understandably skittish with further upside in beans," said Rich Feltes, senior vice president of research for MF Global, in a note.

 

Rain expected in the U.S. southern Plains hard red winter wheat belt is seen as bearish amid expectations that it will improve crop conditions, a trader said. Private weather firm DTN Meteorlogix said "significant rainfall is expected Thursday into Saturday, improving soil moisture levels for crop development and possibly mitigating the effects of some of the freeze damage that occurred in southern areas last week."

 

In spring wheat areas of the northern Plains, some light to moderate rain is expected to develop from west to east during the next few days, Meteorlogix said. Dry weather is expected to return over the weekend and continue through much of next week following flooding and excessive wetness in recent weeks.

 

"Despite the recent drier weather, flood issues continue in North Dakota," Meteorlogix said. "Spring fieldwork is expected to remain well behind schedule."

 

In other news, Ukraine planted spring grains on 4.454 million hectares to April 14, which is 98% of the planned total area, according to the agriculture ministry. Spring wheat to date was planted on 309,000 hectares, or 93% of the total planned area, while spring barley was planted on 3.471 million hectares, or 99% of the planned total area.

 

Wheat stocks in Ukraine on April 1 totaled 6.8 million tonnes, 38% more than a year ago, according to the state statistics committee. The country increased its grain stocks thanks to a large harvest in 2008.

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below solid technical support at US$5.10 3/4, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.84 1/2, he said.

 

First resistance is seen at US$5.45 and then at US$5.50. First support lies at US$5.30 and then at this week's low of US$5.27 1/4.