August 7, 2009

 

US Wheat Outlook on Friday: Seen steady-up as markets attempt bounce

 

 

U.S. wheat futures are called to open steady to higher Friday in a modest recovery from recent losses, with the markets expected to consolidate ahead of crop reports due out next week.

 

In overnight electronic trading, Chicago Board of Trade September wheat edged up 1 1/4 cents to US$5.01 1/2 a bushel. CBOT December wheat added 3/4 cent to US$5.29.

 

Wheat is poised for a "slight bounce from (its) hard sell-off" this week, including a sharp drop Thursday, Country Hedging said in a note. CBOT September wheat on Thursday hit a fresh contract low below psychological support at US$5 on spillover pressure from other markets and a demand snub from Egypt.

 

Thursday's slide marked the third lower close in a row for wheat. The markets could recover a bit, but the sell-off inflicted some technical damage as prices fell below July lows, analysts said.

 

"The technical outlook is bearish and the trends remain down," a technical analyst said.

 

The next key upside objective for bulls is to close CBOT December wheat back above the July low at US$5.32 3/4, as old support becomes key near-term resistance, the technical analyst said. The next key downside target for wheat bears is a psychological target at US$5.25, he said.

 

First resistance is seen at US$5.32 3/4 and then US$5.40, the analyst said. First support lies at US$5.25 and then at US$5.00.

 

There is a lack of fresh fundamental news out for wheat, as the demand front remains quiet, traders said. Egypt on Thursday passed over the U.S. in a tender and booked wheat from France and Russia.

 

In Argentina, officials are working on an agreement with exporters to open up corn and wheat exports while ensuring adequate domestic supply. The government and grain exporters are expected to ink a deal next week, the cabinet chief said.

 

Argentina continues to struggle with dryness, which has reduced plantings and production potential. No significant rainfall is expected during the next seven days, according to private weather firm DTN Meteorlogix.

 

There are pockets of problems in other growing areas around the world, although global supplies are still considered to be large, an analyst said. Some crop losses are expected in the Black Sea region due to hot, dry weather, he said.

 

Rain and near-to-below normal temperatures favor filling spring wheat in the U.S. northern Plains but are "unfavorable for the maturing crop and the harvest," according to Meteorlogix. Warmer weather and less rainfall next week will be favorable, the firm said.

 

Australia's wheat crop has arrived at the critical growth period with rainfall needed in coming weeks to sustain potential for above-average production, industry participants said. Growers are waiting to see how an El Nino plays out in the coming months, as such episodes normally result in drier-than-usual conditions in eastern and southern Australia.

 

The U.S. Department of Agriculture is due to issue updated U.S. and world production and supply/demand reports at 8:30 a.m. EDT Wednesday. The markets should consolidate ahead of the release of the important reports, analysts said.