May 8, 2009

 

US Wheat Outlook on Friday: Higher on technical strength, outside support

 

 

U.S. wheat futures are poised to open higher Friday following overnight gains amid technical support, outside market strength and concerns about crop yields.

 

Chicago Board of Trade wheat is called 4 to 6 cents higher. In overnight trading, July wheat was up 5 1/2 cents to US$5.75 3/4 per bushel and December wheat was up 6 cents to US$6.25 1/2.

 

Traders said the market has been supported by technical buying. An analyst said that there's little fundamentally to support the CBOT and Kansas City markets, although the Minneapolis market does have support due to spring wheat planting delays.

 

"The recent strength in wheat, while we have very little demand for the old crop wheat, has been very impressive, but I don't think it's sustainable," an analyst said.

 

He said the market will need to get off to a higher start early Friday in order to prevent profit-taking.

 

Traders and analysts are also eying crop projections for the crop in the central and southern plains, which some see as supportive.

 

The 2009 Kansas hard red winter wheat crop is expected to have an average yield of 40.8 bushels per acre, according to figures released Thursday from the Wheat Quality Council's annual hard winter wheat tour.

 

The average of tour participants' estimates puts the Kansas HRW wheat production at 333.3 million bushels. The estimate is down from last year, when the state made a 356-million-bushel crop.

 

A trader said he did not put much weight in the numbers because of a weak correlation historically with final yields.

 

"You have to take it with a grain of salt," a floor trader said. "It's up to Mother Nature now."

 

Analysts also noted that the Oklahoma Grain and Feed Association has forecast the state's crop at 77.5 million bushels, down 89 million bushels from last year.

 

Traders said the market should have support from elsewhere, including corn, soybeans and equities.

 

The Chicago market's rally Thursday despite a bearish turn in crude oil, equities and the dollar "is a bullish clue," a technical analyst said.

 

He said 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. 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.

 

First resistance is seen at Thursday's high of US$5.79 1/2 and then at US$5.84 1/4, the technical analyst said. First support lies at US$5.60 and then at Thursday's low of US$5.55 1/2.

 

In other news, a report from Stats Canada Friday morning projected 2008-09 wheat stocks of 15.536 million metric tonnes, below estimates that ranged from 16.000 million to 17.300 million tonnes. Total stocks were 11.458 million tonnes the previous year.