May 29, 2009

 

US Wheat Outlook on Friday: Seen Up 5-7 cents on weak dollar, money flows

 

 

Fund buying and weakness in the U.S. dollar are expected to support U.S. wheat futures at the start of Friday's day session, although the markets are due for a correction after recent rallies, analysts said.

 

Chicago Board of Trade July wheat is called to open up 5 to 7 cents per bushel. In overnight electronic trading, CBOT July wheat rose 6 1/2 cents to $6.37.

 

It seems as though recent activity has been driven more by funds than fundamentals, and the markets could find support from more money flowing in, an analyst said. With that in mind, traders are reluctant to step in front of rallies, he said.

 

The sinking U.S. dollar lends support as it makes U.S. wheat more competitive on the world export market, traders said. Expected gains in neighboring CBOT soybeans and corn could provide spillover strength, they said.

 

Still, wheat futures have "become overdone on the upside, technically, and are due for a corrective pullback soon," a technical analyst said. As of Thursday's close, CBOT July wheat was up 94 cents on the month.

 

The next downside price objective for the bears is pushing and closing CBOT July wheat below solid technical support at $5.84 1/2, the technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at $6.50, he said.

 

First resistance is seen at $6.38 and then at $6.46 1/4, the analyst said. First support lies at $6.18 and then at $6.10, he said.

 

Weekly U.S. wheat export sales were on the low end of expectations and not overly impressive, traders said. Total export sales for the week ended May 21 were 332,100 tonnes, compared to analysts' expectations of 150,000 tonnes to 600,000 tonnes.

 

Net sales of 228,200 tonnes for delivery in 2009-10 were primarily for Nigeria, which booked 85,000 tonnes, and Yemen, which bought 50,000 tonnes, according to the U.S. Department of Agriculture. The 2009-10 marketing year for wheat begins June 1.

 

Looking at the weather, showers will favor jointing-to-reproductive hard red winter wheat through Colorado and Nebraska, private weather firm DTN Meteorlogix said. In North Dakota, the top spring wheat-growing state, drier conditions are expected through the weekend, which should help producers complete late planting.

 

Early harvesting of HRW wheat in Texas and Oklahoma has produced low yields, which was expected following a drought and freezes. Yields should improve as the harvest moves north into Kansas during the next several weeks, an analyst said.

 

Fungal diseases are a worry for soft red winter wheat in the Midwest and south. Fusarium head blight, also known as head scab, can reduce quality and yields.

 

In Argentina, there is no significant rainfall in sight for dry areas in western Buenos Aires and La Pampa, Meteorlogix said. However, early-planted wheat in southern Queensland and northern New South Wales in Australia should benefit from rains early next week, the private weather firm said.