July 28, 2008

 

US Wheat Outlook on Monday: Higher on demand, follow-through support

 

 

U.S. wheat futures are expected to climb in early trading Monday on signs of strong demand and momentum from Friday's gains, traders said.

 

Chicago Board of Trade wheat is called 10 to 12 cents higher. In overnight trading, September wheat was up 13 1/2 cents to US$8.24 1/2 and December wheat was up 12 1/4 cents to US$8.46 3/4.

 

News that Iran, which is suffering from drought, may need to purchase as much as 5 to 6 million metric tonnes of wheat by March 2009 to avoid shortages boosted prices Friday and should continue to do so, analysts said.

 

"I think you'll probably have some follow-through support from Friday with the export development you had," said Terry Reilly, analyst with Citigroup.

 

Hot weather forecast for the U.S. plains and corn belt this week will also provide support, analysts said. Some of that support will come from corn, which is expected to climb on the hot forecast, an analyst said.

 

A trader said that "funds still have decent size shorts," and that short-covering could continue to be supportive.

 

Reilly said that other than export demand and support from corn, "there's not that much out there" to move the wheat market.

 

Speculative funds cut 5,555 contracts from their CBOT wheat short positions and added 1,336 contracts to their long positions, putting them net short 28,827 contracts, the Commodity Futures Trading Commission reported Friday.

 

The supplemental commitments of traders report also showed commercial funds added 1,208 contracts to their short positions and cut 237 contracts from their long positions, putting them net short 122,369 contracts. Index funds added 2,374 contracts to their short positions and cut 1,539 contracts from their long positions, putting the net long 176,061 contracts, the CFTC said.

 

December Chicago wheat prices Friday closed nearer the session high and also closed at a bullish weekly high close, a technical analyst said. Short covering in a bear market was again featured. Bears still have the near-term technical advantage.

 

The next downside price objective is to push and close December prices below solid technical support at last week's low of US$7.98, the technical analyst said. First support lies at US$8.25 and then at Friday's low of US$8.05. The next upside price objective is to push and close December futures prices above solid technical resistance at US$8.50 a bushel.