August 5, 2009

 

US Wheat Outlook on Wednesday: Seen 2-4 cents up on firm corn, weak dollar

 

 

Strength in the row crops and weakness in the U.S. dollar are expected to tug U.S. wheat futures higher at the start of Wednesday's day session.

 

Chicago Board of Trade September wheat is called to open 2 to 4 cents per bushel higher. In overnight electronic trading, CBOT September wheat was up 3 3/4 cents at US$5.46, and CBOT December wheat was up 3 3/4 cents at US$5.74.

 

Expected gains in CBOT corn and soybeans should help boost wheat, which is looking to the neighboring markets for direction, traders said. The soft dollar is seen as friendly because it makes U.S. wheat more competitive for business on the world export market.

 

"It's been a follower of the corn and beans," said Larry Glenn, broker and analyst at Frontier Ag. "It doesn't have that many fundamentals that have supported the trade. It looks like the dollar is down just slightly this morning. That's a little bit supportive."

 

Wheat showed its role as a follower Tuesday, when it was "the weakest link" in the grain markets, Glenn said. CBOT wheat closed down about 7 cents Tuesday, while corn ended down about 3 cents.

 

The corn and soy markets are waiting for private analytical firm Informa Economics to issue production and yield estimates around 11:30 a.m. EDT, a CBOT floor analyst said. The markets could chop around until the numbers are released, he said.

 

The next key upside objective for bulls is to close CBOT December wheat above the July 20 daily swing high at US$5.79 1/2, a technical analyst said. The market edged above that level during the day session Monday but did not settle above it. A solid close above the July 20 high would confirm an intermediate-term bottom on the daily wheat chart, he said.

 

First resistance is seen at US$5.77 and then US$5.84 1/2. First support lies at US$5.67 and then at US$5.56, Friday's high and the gap bottom, the technical analyst said.

 

Looking at the weather, episodes of rain and near to below-normal temperatures will favor filling U.S. spring wheat crop but are unfavorable for the maturing crop and the early harvest, according to private weather firm DTN Meteorlogix. Rain favors crops in the Canadian Prairies, especially in the dry western areas, but cool weather keeps crop development slow, which is a concern, the firm said.

 

There is no significant rainfall expected during the next seven days in Argentina, which has struggled with dryness. A much drier-than-normal weather pattern will continue in the Urals and western Kazakhstan, along with periods of heat, according to Meteorlogix. The firm said "significant crop losses are expected due to hot, dry weather this growing season."

 

In other news, the Commodity Futures Trading Commission is set to hold another set of hearings on speculation in energy markets Wednesday. Grain traders will monitor the proceedings as government regulators also have an eye on reforming the CBOT wheat contract, an analyst said.