April 16, 2009

 

US Wheat Outlook on Thursday: Demand seen as weak after overnight move up

 

 

U.S. wheat futures are called to start slightly higher Thursday on follow-through buying from the overnight session, although traders say it wouldn't be surprising to see weakness creep in.

 

Chicago Board of Trade wheat is called to open 1 to 3 cents per bushel higher. In overnight electronic trading, CBOT July wheat inched up 1 cent to US$5.28.

 

Wheat could feel some spillover strength from firm CBOT soybeans, which "continue to lead the way higher" in the grain complex on bullish fundamentals, a CBOT floor analyst said. However, there is "very little in the way of supportive fundamentals" for wheat itself, said Brian Hoops, president of Midwest Market Solutions.

 

The U.S. is not expected to make big sales to Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, which reportedly issued a tender for wheat after the close of trading Wednesday, Hoops said. The bulk of the business is more likely to go to Russia or the E.U. because their wheat is priced more competitively, he said.

 

Total weekly U.S. wheat export sales of 310,500 tonnes were at the low end of trade expectations, which ranged from 300,000 tonnes to 650,000 tonnes. Net sales of 121,500 tonnes for delivery in 2008-09 were down 36% from last week and 49% from the prior four-week average, according to the U.S. Department of Agriculture.

 

"We've got an Egyptian tender out there," Hoops said. "The trade is guessing that we may get a token share at best and most likely get shut out again. You're looking at another week of poor export news."

 

There continues to be uncertainty about the impact of last week's freeze on hard red winter wheat in the southern U.S. Plains, although that is not enough to carry the markets higher, an analyst said. Cool, wet weather since the cold snap has been favorable for the crop, he said.

 

Episodes of rain through Saturday will improve soil moisture levels for crop development in the central and southern Plains, according to private weather firm DTN Meteorlogix. Excessive wetness continues to be a concern in the northern Plains, meanwhile, as spring wheat planting is being delayed, traders said.

 

There are signs that rainfall could increase in the flood areas later next week, and some spring wheat acreage may not get planted, Meteorlogix said. Still, large carryover will keep a lid of prices, traders said.

 

"Wheat's going to continue to struggle because we just don't have enough demand to cut through those ending stocks," Hoops said. "You just have plenty of cushion, even if there was some damage or if there was delayed spring planting."

 

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. 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$5.41 3/4 and then at US$5.50. First support lies at US$5.26 1/2 and then at US$5.20.