July 9, 2009

 

US Wheat Outlook on Thursday: Seen 4-6 cents up on overnight gains, exports

 

 

Gains overnight are setting a firmer tone for U.S. wheat futures Thursday amid ideas that prices are becoming more competitive on the export market, analysts said.

 

Chicago Board of Trade September wheat is called to open up 4 to 6 cents per bushel. In overnight electronic trading, CBOT September wheat rose 5 3/4 cents to US$5.23, and CBOT December wheat gained 5 3/4 cents to US$5.49.

 

Short-covering should boost prices as the markets continue to recover from recent losses, a trader said. Speculative funds are heavily short in CBOT wheat, he said.

 

Wheat ended mostly higher Wednesday but is "still short-term oversold," a technical analyst said. The markets are "due for more of a corrective bounce soon" after falling steadily during the past five weeks, he said.

 

There could be some positioning ahead of U.S. Department of Agriculture crop reports due out at 8:30 a.m. EDT Friday, traders said. The government will issue fresh estimates on U.S. wheat production and carryout.

 

There are ideas U.S. wheat is becoming more competitive for export business following two recent sales in Egypt, a trader said. The USDA said export sales for the week ended July 2 were 584,200 tonnes, above trade expectations for 200,000 tonnes to 450,000 tonnes.

 

Export sales were "up noticeably from the previous week," the USDA said. Increases were reported for Japan, which bought 87,500 tonnes, Taiwan, which bought 84,400 tonnes, and South Korea, which booked 64,800 tonnes.

 

Outside influences look supportive, although wheat has showed recently it is not tied to activity in the outside markets, a CBOT trader said. Crude oil is stronger, while the U.S. dollar is weaker.

 

Weather looks mostly favorable for continued U.S. winter wheat cutting, traders said. There are reports of solid harvest results coming in from Ohio, a major soft red winter wheat-growing state, a CBOT floor trader said.

 

The developing spring wheat crop should benefit from rain in the northern U.S. Plains, he said. The region will see periodic thunderstorm activity and some warmer-to-hotter temperatures at times, according to private weather firm DTN Meteorlogix.

 

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$5.49 and then at US$5.57. First support lies at US$5.38 and then at US$5.30, he said.