July 8, 2009

 

US Wheat Outlook on Wednesday: Seen up early; could trade both sides

 

 

U.S. wheat futures are called to open slightly higher Wednesday after rising overnight, although the markets could struggle to hold gains amid a lack of supportive news, traders said.

 

Chicago Board of Trade September wheat is called to start 2 to 3 cents per bushel higher. In overnight electronic trading, CBOT September wheat gained 1 1/2 cents to US$5.14, while CBOT December wheat gained 1 1/4 cents to US$5.39 3/4.

 

Wheat is technically oversold and due for a corrective bounce after recent losses, traders said. However, the ongoing U.S. winter wheat harvest and projections for plentiful world supplies continue to hang over the markets, an analyst said.

 

The markets could start mixed due to continued bearishness about adequate supplies and lackluster demand, said Tom Leffler, owner of Leffler Commodities. Wheat was firmer ahead of Tuesday's day session but closed lower after trading both sides.

 

"Even though we were up last night, it wasn't anything impressive considering the downside we saw," Leffler said.

 

Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, is seeking wheat in a tender, according to traders. Last week, GASC bought 60,000 tonnes of U.S. soft red winter wheat and 30,000 tonnes of French wheat in a tender for shipment Aug. 1-10. The U.S. would have to make a sizeable sale to Egypt to generate significant support for the markets, Leffler said.

 

The U.S. Department of Agriculture on Friday is slated to issue fresh supply/demand and wheat production estimates. The reports will include the government's first estimates on production of U.S. spring wheat other than durum and of durum.

 

Weather remains "generally favorable" for developing spring wheat in the northern U.S. Plains, according to private weather firm DTN Meteorlogix. In the central and southern Plains, "a few isolated thunderstorms may cause problems for the harvest in the west and north this week, but these are so isolated as to not be much of concern overall," the firm said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$5.25, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.80, he said.

 

First resistance is seen at US$5.52 3/4 and then at US$5.57. First support lies at US$5.38 and then at US$5.30.