July 17, 2009

 

US Wheat Outlook on Friday: Seen up 4-6 cents on rebound, firm corn/soy

 

 

U.S. wheat futures are poised to start firmer Friday in a rebound from a slight setback Thursday, with support seen from short-covering and strength in neighboring markets.

 

Chicago Board of Trade September wheat is called to open 4 to 6 cents per bushel higher. In overnight electronic trading, CBOT September wheat was up 6 3/4 cents to US$5.40, and CBOT December wheat was up 6 1/2 cents at US$5.66.

 

Speculative funds continue to hold a large net short position in CBOT wheat, which is seen as supportive for the market, traders said. The funds are net short about 41,000 contracts, a CBOT floor trader said.

 

Trading has been choppy all week, and wheat has been unable to close near its highs. There are "a lot of air pockets" in the market, a CBOT trader said.

 

Weakness in CBOT soybeans and corn dragged U.S. wheat lower Thursday after wheat spent most of the day in positive territory. Corn and soybeans have been falling lately on favorable growing weather.

 

If the neighboring markets stabilize, it could open the door for gains in wheat, a trader said. Corn and soy were higher overnight.

 

"We need some help from corn to run," a CBOT trader said.

 

Weather looks mostly non-threatening for wheat, traders said. Argentina continues to suffer with severe dryness, although it should receive rain in some areas.

 

The best chance for "significant rain" early next week appears to be for northern and eastern wheat areas, according to private weather firm DTN Meteorlogix. The driest areas of the wheat belt, La Pampa and western Buenos Aires, should see only light showers, which is not enough to improve conditions in the area, the firm said.

 

Crops in the Canadian Prairies will "mostly benefit" from warmer temperatures during the next few days, as development of crops is still significantly behind normal, Meteorlogix said. However more rainfall is still needed in the west after the early season drought, according to the firm.

 

In the U.S. northern Plains, spring wheat will mostly benefit from a hotter trend during the next few days, except possibly in the west where it may be "somewhat too dry," Meteorlogix said. Showers in central and eastern areas early next week will favor crop growth.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$5.38, 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$5.75 1/2 and then at US$5.80. First support lies US$5.54 3/4 and then at this week's low of US$5.43 3/4, the analyst said.