July 7, 2009

 

US Wheat Outlook on Tuesday: Seen up 3-5 cents on rebound, oversold ideas

 

 

U.S. wheat futures are expected to start stronger Tuesday in a turnaround from recent losses supported by ideas the markets are technically oversold.

 

Chicago Board of Trade September wheat is called to open 3 to 5 cents per bushel stronger. In overnight electronic trading, CBOT September wheat rose 5 cents to US$5.24 1/4, and CBOT December wheat edged up 4 1/2 cents to US$5.49 3/4.

 

Wheat is due for a recovery after grinding lower during the past month, a CBOT floor trader said. CBOT wheat is in a "steep five-week-old downtrend" and "short-term oversold," a technical analyst said.

 

The market has the potential to rise on short-covering as speculative funds remain net short in CBOT wheat, a trader said. Non-commercial speculative funds expanded their net short position to 36,627 contracts as of June 30 from 27,567 contracts a week earlier, according to supplemental reports from the Commodity Futures Trading Commission.

 

Wheat continues to probe for harvest lows after hitting fresh seasonal lows Monday, an analyst said. U.S. winter wheat cutting was 56% complete as of Sunday, compared to the average of 59%, according to the U.S. Department of Agriculture.

 

Cutting should be 75% complete by the end of the week, said Mike Zuzolo, analyst for Risk Management Commodities. The weather looks "more favorable" for harvest in the Plains this week after some thunderstorms during the weekend, according to a forecast from private weather firm DTN Meteorlogix.

 

Hedge pressure "should be winding down" now that more than half the crop is cut, said Mark Gold, managing partner at Top Third Ag. Hedging been more of a factor at the Kansas City Board of Trade than the CBOT so far, a CBOT floor trader said.

 

The USDA said 47% of winter wheat was in good-to-excellent condition as of Sunday, up two percentage points from the previous week. Spring wheat ratings slipped to 72% good-to-excellent from 76% a week ago, which "may help to firm the wheat," Gold said in a market comment.

 

Expected gains in corn, soybeans and crude oil should add to the supportive tone for wheat, a trader said. Weakness in the dollar is also friendly, although wheat has shown recently that it can trade independently from the dollar, he said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$5.42, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$6.00, he said.

 

First resistance is seen at US$5.57 and then at US$5.67 3/4. First support lies at US$5.42 and then at US$5.25, he said.

 

In other news, Japan said it won't hold its routine wheat tender this week but declined to explain why. The tender will resume next week, an official said.