July 23, 2009

 

US Wheat Outlook on Thursday: Higher on short-covering, corn strength

 

 

U.S. wheat futures are expected to open higher Thursday amid short-covering following recent losses and support from corn and soybeans.

 

CBOT wheat is called 3 to 5 cents higher. In overnight trade, September wheat was up 3 3/4 cents to US$5.25 3/4 and December wheat was up 4 cents to US$5.53.

 

Traders said after recent losses, including a drop of about 30 cents from Monday's intraday high, the market is a little oversold and primed for a bounce. There's little fundamental news to support the market, they said, but corn and soybeans will give wheat a boost, they said.

 

Corn in particular should lend strength after the U.S. Department of Agriculture said Wednesday afternoon it would re-survey corn acreage for its August report. The trade largely thinks that any significant change in acreage would be downward. Gains in corn "gave us a little buoyancy" overnight, a wheat trader said.

 

Wheat got "beat up" yesterday, the trader said, thanks to concern about the government's apparent plan to boost convergence in the market by tightening position limits for index funds.

 

"Index funds are a reportedly net long 161,490 contracts of Chicago wheat or 41.17% of the long open interest," Kevin R. Kjorsvik, analyst for Benson Quinn Commodities, noted in a market commentary. "As a result Chicago would be the most adversely affected by a forced exodus."

 

Weak export demand is also weighing on the market, analysts said.

 

In export news, Japan's Ministry of Agriculture, Forestry and Fisheries purchased 108,000 metric tonnes of wheat in a tender concluded Thursday, an agriculture ministry official said. Of that, 87,000 metric tonnes will be of U.S. origin.

 

A trader called the sales routine. Weekly export sales of 342,300 reported Thursday were also "not very exciting" and at the low end of expectations, a floor analyst said.

 

Traders are watching the weather, with "small pockets of problem areas around the world," but nothing serious enough to boost the market.

 

The next downside price objective for the bears is pushing and closing prices below solid technical support at US$5.00, a technical analyst said. The next upside price objective is to push and close December futures prices above solid technical resistance at this week's high of US$5.80 a bushel.

 

First resistance is seen at Wednesday's high of US$5.60 and then at US$5.70. First support lies at Wednesday's low of US$5.40 and then at the July low of US$5.38.