April 20, 2009

 

US Wheat Outlook on Monday: Lower on outside pressure, technical weakness

 

 

U.S. wheat futures are expected to open lower Monday on outside pressure and a lack of bullish news, analysts said.

 

Chicago Board of Trade wheat is called 8-10 cents lower In overnight trading, May CBOT wheat was down 9 3/4 cents to US$5.13 1/4 per bushel and July wheat was down 10 cents to US$5.24 3/4.

 

Follow-through selling should weigh early, and outside markets are expected to pressure, with equities lower and the dollar higher.

 

The trade is still trying to assess damage to the hard red winter wheat crop from a recent freeze.

 

"Much of the hard red winter wheat belt received good moisture over the past week, though conditions should begin to dry out again rather quickly," Farm Futures said in a morning commentary. "Traders will watch this afternoon's Crop Progress for more signs of damage from the freeze earlier this month."

 

Another analyst said the trade is reluctant to react too quickly to the possibility of damage.

 

"We've seen these crops rebound from being damaged earlier in the crop year," he said. "Areas have received much-needed moisture, temperatures are rising."

 

The market is technically weak, analysts said.

 

"The recent trend in the corn and wheat have been technically very disappointing on a daily basis-both of these new crop futures have failed at their 100 day Moving Averages, and this is a reflection of the trade's current view on their fundamentals," Mike Zuzolo, senior analyst for Risk Management Commodities, said in a market commentary.

 

The next downside price objective for the bears is pushing and closing July prices below solid technical support at the March low of US$5.10 3/4, a technical analyst said. The bulls' next upside price objective is to push and close July futures prices above solid technical resistance at the April high of US$5.84 1/2 a bushel.

 

Weak demand is also pressuring the market. An analyst noted that Egypt bought Russian and French wheat in a tender last week, bypassing the U.S.

 

Speculators cut 2,699 contracts from their CBOT wheat positions and cut 348 contracts from their short positions, putting them net short 34,610 contracts, the Commodity Futures Trading Commission said Friday.

 

The supplemental commitment of traders report also showed that commercial funds added 709 contracts to their long positions and cut 410 contracts from their short positions, putting them net short 86,389 contracts. Index funds cut 5,108 contracts from their long positions and cut 8,456 contracts from their short positions, the CFTC said.