April 17, 2009

 

US Wheat Outlook on Friday: Seen up on soy, short-covering, weather

 

 

Borrowed strength from Chicago Board of Trade soybeans and wet weather in the northern U.S. Plains are expected to push U.S. wheat futures higher at the start of Friday's day session.

 

Chicago Board of Trade July wheat is called to open up 1 to 3 cents per bushel. In overnight electronic trading, CBOT July wheat crawled 1 1/2 cents higher to US$5.38.

 

Soybeans, which were firmer overnight, continue to be the leader on the CBOT agricultural floor, traders said. The soy complex has rallied recently on bullishness about South American production problems and strong Chinese demand.

 

Short-covering could help wheat advance, as non-commercial speculative funds are net short in CBOT wheat, an analyst said. "Wheat has been used as the 'short leg' of nearly every inter-commodity spread and could be vulnerable to short covering with funds back to a net short position exceeding 30,000 contracts," according to a note from AgResource Co.

 

There are worries that excessive wetness will continue to delay spring wheat planting in the northern Plains, traders said. Rainfall could increase in flood areas later next week or next weekend, although the near term looks drier, according to private weather firm DTN Meteorlogix.

 

"Look for a higher start on weather conditions and strength in soybeans," Country Hedging told traders in a market comment.

 

The U.S. Department of Agriculture is slated to issue an update on spring wheat planting at 4 p.m. EDT Monday in its weekly crop progress report. Traders will also be looking at winter wheat condition ratings after a freeze last week in hard red winter wheat areas of the southern Plains.

 

Rain is expected in the central and southern Plains through Saturday and should improve soil moisture levels for crop development, Meteorlogix said. The moisture may lessen the effects of some of the freeze damage, the firm said.

 

Demand for U.S. wheat continues to be lackluster, and world supplies look plentiful, analysts said. There was little fresh fundamental news out overnight, they said.

 

Wheat remains in a sideways technical trend, with the markets seen as rangebound, an analyst said. Nearby CBOT May wheat this week closed up twice and down twice.

 

"We haven't gone anywhere all week," FuturesTechs said in a note.

 

CBOT July wheat needs to move above US$5.45 "to get anything to excite to the upside," the firm said. Below the contract's Thursday open outcry low of US$5.25 1/4, there is support at US$5.13 3/4, US$5.10 3/4 and US$4.97, it said.

 

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.