June 26, 2009

 

US Wheat Outlook on Friday: Seen up, taking cue from overnight

 

 

U.S. wheat futures are poised to start firmer Friday after rising overnight but may struggle to hang on to gains amid expectations for active harvesting this weekend, traders said.

 

Chicago Board of Trade September wheat is called to open 2 to 3 cents per bushel higher. In overnight electronic trading, CBOT September wheat gained 2 1/4 cents to US$5.63 3/4, while CBOT December wheat was up 3 cents at US$5.89 1/4.

 

Short-covering and strength in CBOT soybeans could help lift wheat after soybeans led the upside overnight, an analyst said. Weakness in the U.S. dollar is seen as supportive, although wheat recently has shown it is not tied to activity in the dollar, a CBOT floor trader said.

 

"The key 'outside markets' were bullish for wheat futures [Thursday], as the U.S. stock indexes were higher, crude oil was higher and the U.S. dollar was weaker," a technical analyst said. "However, wheat sold off anyway, which suggests grain traders may finally be focusing more on supply and demand fundamentals in the grain markets than on the outside markets."

 

Wheat is technically oversold and due for a bounce after recent losses, traders said. As of Thursday's close, CBOT September wheat was down 23 cents on the week.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$5.63, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.30, he said.

 

First resistance is seen at US$5.94 1/2 and then at US$6.00. First support lies at US$5.81 and then at US$5.75, the technical analyst said.

 

"The market's in trouble technically," a CBOT floor trader said. "It just continues to bleed."

 

The ongoing U.S. winter wheat harvest could put more pressure on the markets ahead of the weekend, an analyst said. Warm, dry weather is seen as favorable for cutting. World wheat supplies also are considered to be ample.

 

"No major delays to the harvest are expected during the next seven to 10 days" in hard red winter wheat areas of the U.S. central and southern Plains, according to private weather firm DTN Meteorlogix. Some disruptions are possible due to periodic thunderstorms, the firm said.

 

Developing spring wheat in the northern Plains should see "generally favorable weather, according to Meteorlogix. An Argentina, which needs rain, "an overall dry weather pattern will continue," the firm said.

 

Sufficient early rains and a swift start to plantings in Australia have prompted analysts to predict the next wheat crop in the range of 22 million to 23 million tonnes. However, much could change between now and the harvest if there aren't enough follow-up rains. The U.S. Department of Agriculture this month pegged production at 23 million tonnes.

 

Traders are waiting for USDA to update its U.S. acreage and quarterly grain stocks estimates in crop reports due out Tuesday. The reports will be more of an event for corn and soybeans than for wheat, but the markets will look to see how the government adjusts U.S. spring wheat acres, a trader said.