August 17, 2009

 

US Wheat Outlook on Monday: Seen down on firm dollar, weak corn, soy

 

 

Pressure from outside and neighboring markets is expected to weigh on U.S. wheat futures at the start of Monday's day session, traders said.

 

Chicago Board of Trade September wheat is called to open 8 to 10 cents per bushel lower. In overnight electronic trading, CBOT September wheat fell 10 1/4 cents to US$4.71 1/2, and CBOT December wheat lost 10 1/4 cents to US$4.99 1/4.

 

Strength in the U.S. dollar and losses in crude oil and equities should keep the grains under pressure after they fell overnight, traders said. A strong dollar is seen as bearish because it makes U.S. wheat less attractive to foreign buyers.

 

CBOT corn and soybeans are called to open lower with wheat, with soybeans leading the downside. Weakness in the row crops should drag wheat down, as corn and soybeans feel pressure from the outside markets and forecasts for non-stressful U.S. weather, traders said.

 

"Wheat continues to edge lower, trading around an 8-month low with growing supplies and weak demand," Country Hedging said in a note.

 

However, wheat is technically oversold and could find some support from short-covering, a trader said. Non-commercial speculative funds expanded their net short position in CBOT wheat futures and options to 54,196 contracts as of Aug. 11, down from 50,378 contracts as of Aug. 4, the Commodity Futures Trading Commission said in a supplemental Commitments of Traders report.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below major psychological support at US$5.00, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.40, he said.

 

First resistance is seen at Friday's high of US$5.14 1/4 and then at last week's high of US$5.26 3/4, the analyst said. First support lies at US$5.00 and then at US$4.85, he said.

 

Traders are keeping an eye on weather in the northern U.S. Plains as spring wheat harvest advances. Periods of rain and cooler temperatures during the next five to seven days will be unfavorable for the maturing crop and the harvest, according to private weather firm DTN Meteorlogix.

 

In Australia, more rain is needed in the minor growing area of southern Queensland, Meteorlogix said. Conditions are "mostly favorable" elsewhere, but El Nino could bring drier weather to the eastern wheat areas in the coming months, according to the firm.

 

Argentine wheat conditions improved over the past week across much of the farm belt, although the crop is suffering from drought in the western areas, the Agriculture Secretariat said in its weekly crop report Friday. In the Laboulaye district of Cordoba province "conditions are deteriorating due to the lack of water and typical August winds," it said.

 

In the Coronel Dorrego district of Buenos Aires Province, farmers planted 27% less wheat area than last season. Initial expectations were for a 40% drop, "but due to the showers in the last days, area is being increased," the Secretariat said.