August 18, 2008

 

US Wheat Outlook on Monday: 10-12 cents up on rebound, spillover strength

 

 

U.S. wheat futures are poised to start Monday's day session higher in a rebound from a sharp sell-off Friday, with firm Chicago Board of Trade corn and soybeans helping give the markets direction.

 

CBOT September wheat is called to open 10 to 12 cents per bushel higher. In overnight electronic trading, CBOT September wheat jumped 10 cents to US$8.34 1/4 per bushel, and CBOT December rose 10 3/4 cents to US$8.60.

 

The wheat markets are due for a bounce after CBOT wheat Friday dropped 40 cents on spillover pressure from weakness in other markets and strength in the U.S. dollar, an analyst said. The greenback Monday is a shade weaker, and crude oil is slightly stronger.

 

Wheat's volatility lately has been high and it would not take much to push the markets a dime higher at the opening, a CBOT floor trader said. Price action early this week in wheat will be "extra important," as it could indicate the dominant trend of the market for the next few weeks, a technical analyst said.

 

Short-covering should help give the market a boost after Friday's setback, an analyst said. Non-commercial speculative funds cut short CBOT wheat futures and options positions by 2,707 contracts, leaving them net short 22,830 contacts as of Aug. 12, the Commodity Futures Trading Commission said in a supplemental report.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$8.00, the technical analyst said. Bulls' next upside price objective is to push and close December futures prices above psychological resistance at US$9.00, he said.

 

First resistance is seen at US$8.75 and then at Friday's high of US$8.88 1/2. First support lies at Friday's low of US$8.40 1/2 and then at US$8.25.

 

Traders are waiting for the U.S. Department of Agriculture to issue its weekly crop progress report at 4:00 p.m. EDT. The report will include an update on the U.S. spring wheat harvest, which has been lagging due to wet weather in the Dakotas.

 

Hot, dry weather should continue a few more days before cooler temperatures and showers develop in northern Plains, DTN Meteorlogix said. Conditions overall are "favorable" for maturing wheat and wheat cutting, the private weather firm said.

 

In Argentina, more rain would benefit crop planting, emergence and development, especially in northern portions of the central grain belt. The outlook for the next seven days shows only a little light shower activity, the firm said.

 

There is no significant rainfall in the forecast during the next seven days in Australia's wheat areas either, Meteorlogix said. A very cold air mass is expected through southeast locations during the period.

 

In other news, the Indian government is likely to sell 4 million tonnes of subsidized wheat in the open market, starting in October, according to a report. The sales would be expected and not an influence on U.S. wheat futures, a CBOT floor trader said.

 

Kazakhstan, meanwhile, will lift its ban on the export of wheat on Sept. 1, the government press service said. The ban was imposed April 15 amid fears about domestic shortages, as Kazakhstan was exporting wheat at a record 1.1 million to 1.4 million metric tonnes a month.

 

In Ukraine, the proportion of feed grain in the total harvest is higher than the two thirds expected by the Agriculture Ministry, according to the ministry's press service. Export business could come to the U.S. if buyers are seeking quality wheat that they can't source from the Black Sea region, an analyst said.