August 3, 2009

 

US Wheat Outlook on Monday: Seen up on overnight, spillover support

 

 

Spillover strength from row crops and supportive outside markets are expected to push U.S. wheat futures higher at the start of Monday's day session.

 

Chicago Board of Trade September wheat is called to open 5 to 7 cents per bushel higher. In overnight electronic trading, CBOT September wheat gained 7 1/4 cents to US$5.35 1/2, and CBOT December wheat rose 7 3/4 cents to US$5.63 1/2.

 

Wheat should feel a boost from firm CBOT soybeans and corn and from the falling U.S. dollar, traders said. November soybeans surged 43 1/2 cents overnight, while December corn added 11 3/4 cents to US$3.61 1/4.

 

CBOT wheat posted a strong close Friday and ended the day near session highs. However, "wheat bears still have the solid overall near-term technical advantage," a technical analyst said. Prices have been trading sideways at lower levels for four weeks, he said.

 

"Wheat continues to lag strength in row crops with large supplies overhanging the market," Country Hedging said in a market comment.

 

The next downside price objective for bears is pushing and closing CBOT December wheat below major psychological support at US$5.00, the technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.79 1/2, he said.

 

First resistance is seen at US$5.60 and then at US$5.79 1/2. First support lies at US$5.43 and then at US$5.33 1/2, he said.

 

There is a lack of fresh fundamental news for wheat, but speculative funds continue to hold a large net short position in CBOT wheat, traders said. Non-commercial speculative funds trimmed their net short position to 49,838 contracts as of July 28, down from 50,645 contracts a week earlier, the Commodity Futures Trading Commission said in a supplemental Commitments of Traders report.

 

Overall, weather looks mostly benign for wheat, an analyst said. Near to below-normal temperatures and near to above-normal rainfall during the next six to 10 days will favor developing U.S. spring wheat, according to private weather firm DTN Meteorlogix.

 

Traders will look to the U.S. Department of Agriculture's weekly crop progress report, due out at 4 p.m. EDT, for an update on the crop's condition. North Dakota has the potential to produce a big spring wheat crop but needs to avoid damaging weather before harvest.

 

Rain later this week in the Canadian Prairies will favor crops, while cool weather will keep development slow, Meteorlogix said. Some patchy frost is possible in the east through midweek, but no damaging cold is expected, according to the weather firm.