April 29, 2009

 

US Wheat Outlook on Wednesday: 4-6 cents up on slow seeding, outside support

 

 

Wetness in the U.S. northern Plains and firm outside markets should help lift U.S. wheat futures at the start of Wednesday's day session, analysts said.

 

Chicago Board of Trade July wheat is called to open 4 to 6 cents per bushel higher. In overnight electronic trading, CBOT July wheat jumped 5 3/4 cents to US$5.27 3/4.

 

Traders continue to watch the weather in the northern Plains as cool, wet conditions have delayed planting. Light rain or snow is expected Friday, but forecasts turn mostly drier Saturday and Sunday, private weather firm DTN Meteorlogix said. Still, temperatures are expected to be below normal, which does not help drying.

 

The spring wheat crop was 15% planted as of Sunday, up from 6% the previous week but well behind the average of 36%, according to the U.S. Department of Agriculture. A year earlier, 32% of the crop was planted.

 

"Weather doesn't look all that great for spring wheat planting," Country Hedging said in a note.

 

It remains supportive for nearby Minneapolis Grain Exchange spring wheat that deliverable supplies of hard red spring wheat are tight, traders said. As of April 24, deliverable stocks of HRS wheat at Duluth/Superior were 3.338 million bushels, down from 4 million a week earlier and 12.5 million a year ago, according to data from the exchange.

 

Trading could be choppy due to positioning ahead of first notice day for May contracts Thursday, analysts said. First notice day is the first day on which notices of intention to deliver actual commodities against futures-market positions can be received.

 

Bullish signals from outside markets, including gains in crude oil, are seen as supportive for the grains, traders said. Weakness in the U.S. dollar makes U.S. wheat more attractive to foreign buyers.

 

In other news, the markets continue to keep one eye on news about swine flu amid worries it could reduce pork consumption and animal feed demand, an analyst said. The flu will "continue to cause uncertainty in the market, though it appears that it has little direct affect on the wheat market itself," Country Hedging said.

 

Looking at technical charts, CBOT wheat has been trading sideways at lower price levels for two months, a technical analyst said. CBOT July wheat has formed "some kind of a bottom at US$5.18" and is looking at US$5.38 as its next target, according to a note from FuturesTechs.

 

"We're simply playing the levels today with a mild bullish bias in the short term," FuturesTechs said. "Only breaking US$5.10 3/4 would get us thinking seriously about switching to bearishness."

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below major psychological support at US$5.00, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.50 1/2, he said.

 

First resistance is seen at Tuesday's high of US$5.29 3/4 and then at US$5.38. First support lies at Tuesday's low of US$5.18 1/4 and then at the March low of US$5.10 3/4.