July 20, 2009

 

US Wheat Outlook on Monday: Seen up on short-covering, technical buying

 

 

Short-covering and support from other markets are expected to boost U.S. wheat futures at the start of Monday's day session.

 

Chicago Board of Trade September wheat is called to open 4 to 6 cents per bushel higher. In overnight electronic trading, CBOT September wheat rose 5 3/4 cents to US$5.47 1/2, and CBOT December wheat was up 6 1/2 cents at US$5.74 1/2.

 

Short-covering and technical buying could lift prices as the markets are starting to accumulate some positive momentum, an analyst said. Non-commercial speculative funds were net short 53,353 contracts as of July 14, up from 50,363 contracts a week earlier, according to supplemental reports from the Commodity Futures Trading Commission.

 

The next upside target for CBOT September wheat is US$5.65 following a "fairly gradual reversal" from a recent downtrend in the markets, FuturesTechs said in a note. It's supportive that the contract in overnight trading rose above the 20-day moving average around US$5.41 1/4, according to the firm.

 

Buy stops will likely be triggered if CBOT and KCBT wheat push through technical resistance levels directly above the markets, a broker said. CBOT September wheat could attract technical buying if it tops its overnight high of US$5.52 3/4, and KCBT September wheat is looking to move above US$5.57 1/4, he said.

 

"The chart action will attract technical buyers if we get a little more push," he said.

 

Strength in crude oil and weakness in the U.S. dollar look friendly for the grains, traders said. Expected gains in CBOT corn and wheat add support to wheat, they said.

 

There is a lack of fresh fundamental news, traders said. The U.S. Department of Agriculture will issue its weekly export inspections report at 11 a.m. EDT and its weekly crop progress report at 4 p.m. EDT.

 

Spring wheat in the northern U.S. Plains will "mostly benefit from a hotter trend, except possibly in the west where it may be somewhat too dry," DTN Meteorlogix said in a forecast. Showers in central and eastern areas will favor crop growth, the private weather firm said.

 

Dryness has been the main risk to wheat in the Urals and western Kazakhstan so far, but conditions turned hot during the weekend. Hot weather continues early this week before cooling weather develops, according to Meteorlogix.

 

"Prospects for wheat in the area continue to decline," the firm said.

 

In Argentina, it looks likely that the dry southwest growing belt will miss the significant rains early this week, according to Meteorlogix. A storm forming off the coast indicates the heavy rain chances are mostly for northeast and east-central areas, the firm said.