June 26, 2008

 

US Wheat Outlook on Thursday: Seen rising on technical buying, demand

 

 

Technical buying and solid demand should boost U.S. wheat futures at the start of Thursday's day session.

 

Chicago Board of Trade September wheat is called to open 6 to 8 cents per bushel higher. In overnight electronic trading, CBOT September wheat jumped 7 3/4 cents per bushel to US$9.28, while CBOT December wheat rose 7 1/4 cents to US$9.51.

 

Short-covering has boosted U.S. wheat in recent sessions and should continue to give the markets strength, traders said. The bulls regained the slight near-term technical advantage Wednesday after a rally, a technical analyst said.

 

"Shorts are on the defensive," a CBOT floor trader said. "They'll continue to be."

 

Demand also looks supportive, with the U.S. Department of Agriculture announcing that U.S. private exporters sold 280,000 metric tonnes of hard red winter wheat for delivery to unknown destinations in the 2008-09 marketing year, a trader said. The wheat marketing year began June 1.

 

Weekly U.S. wheat export sales were at the high end of trade expectations. The USDA said total sales for the week ended June 19 were 503,400 tonnes, and analysts were looking for sales of 300,000 to 550,000 tonnes.

 

Gains in CBOT corn and soybeans could lend some spillover support, traders said. A rally in crude oil and weakness in the U.S. dollar index are seen as bullish for the grains.

 

The next upside price objective for CBOT September wheat is to take out the area around US$9.31 1/4, a CBOT trader said. A move above that level could bring in additional buying, he said.

 

For CBOT December wheat, the bulls' next upside price objective is to push and close the contract above solid technical resistance at the June high of US$9.54, the technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid technical support at US$9.00, he said.

 

First resistance is seen at US$9.54 and then at US$9.75. First support lies at US$9.25 and then at Wednesday's low of US$9.08 1/2.

 

The wheat markets continue to keep an eye on U.S. harvest progress amid some concerns that wet weather is delaying cutting and may have lowered output. Thunderstorms continue to threaten the harvest pace of soft red winter wheat in parts of the Midwest, traders said. Drier weather the in the central and southern Plains this week should allow hard red winter wheat cutting to advance, DTN Meteorlogix said.

 

"The wheat markets remain resilient as the SRW and HRW harvests move north," said Brian Henry, broker for Archer Financial Services, in a market comment. "Based on the recent performance of wheat, the futures markets look poised to move even higher."

 

In the Southern Hemisphere, Argentina's wheat likely benefited from rain last week, but more moisture is needed to improve the crop's outlook, Meteorlogix said. There is a good chance for significant shower activity in West Australia's wheat areas Thursday and Friday.