July 15, 2009

 

US Wheat Outlook on wednesday: Seen up on rebound, spillover support

 

 

Technical buying and spillover support from other markets are expected to lift U.S. wheat futures at the start of Wednesday's day session.

 

Chicago Board of Trade September wheat is called to open 4 to 7 cents per bushel higher. In overnight electronic trading, CBOT September wheat rose 6 3/4 cents to US$5.36 3/4, and CBOT December wheat gained 7 cents to US$5.63 1/2.

 

The markets should bounce after slipping Tuesday in a setback from strong gains Monday, said Larry Glenn, broker and analyst for Frontier Ag. The technical chart picture looks "a little bit promising" following Monday's rally, he said.

 

It seems as though the markets have tried to put in a base after tumbling steadily since June 1, Glenn said. The "psychology of harvest pressure" seems to have faded as winter wheat cutting is more than two-thirds complete, he said.

 

Speculative funds continue to hold a large net short position in CBOT wheat, traders said. Monday's rally was seen as a technical bounce to oversold conditions.

 

"I don't look for a huge rally," Glenn said. "I look for a bounce."

 

The next downside price objective for bears is pushing and closing CBOT December wheat below solid technical support at US$5.38, a technical analyst said. The 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$5.70 3/4 and then at US$5.80. First support lies at US$5.50 and then at US$5.43 3/4, the technical analyst said.

 

Outside markets look supportive for the grains, as the U.S. dollar is weaker and crude oil is stronger, traders said. CBOT corn and soybeans are called to open firmer.

 

Rallies in wheat will likely be met with farmer selling because the markets' fundamental storyline continues to be seen as bearish, an analyst said. World supplies are considered ample, and export news remains light.

 

Some parts of the world are struggling with dryness, although farmers are still expected to produce the second biggest global crop in history. In Argentina, soil moisture levels remain low and planting conditions continue to deteriorate despite some showers last week, the Agriculture Secretariat said in its weekly crop report.

 

Scattered to widely scattered thunderstorms in the central U.S. Plains may cause local problems for the remaining hard red winter wheat harvest but nothing too serious, according to DTN Meteorlogix. Heat may develop in the northern Plains as a ridge shifts to the western U.S., but spring wheat will "mostly benefit from the warmer to hotter temperatures" following recent rains, the private weather firm said.

 

Recent rainfall has improved soil moisture for crops in "all locations" of the Canadian Prairies, but warmer temperatures are needed to advance development, Meteorlogix said. Temperatures are expected to turn warmer during the next few days and stay warmer early next week, it said.