August 21, 2008

 

US Wheat Outlook on Thursday: Up on outside markets, weak dollar, demand

 

 

U.S. wheat futures are expected to start Thursday's day session higher on spillover support from other markets, a soft dollar and solid export demand.

 

Chicago Board of Trade December wheat is called to open 5 to 7 cents per bushel higher. In overnight electronic trading, CBOT December wheat jumped 6 cents to US$9.05 1/2.

 

Wheat should climb along with CBOT corn and soybeans, and early gains could exceed the overnight trend, a CBOT floor trader said. Outside markets, including crude oil and metals, also are higher, while the U.S. dollar is weaker.

 

"It'd be pretty hard for wheat not to start higher" with all the other markets expected to rise, the CBOT floor trader said.

 

A weaker dollar is seen as supportive for U.S. grains because it gives foreign importers more buying power. Demand for U.S. wheat continues to look solid, with the U.S. Department of Agriculture reporting total 2008-09 weekly export sales of 916,500 tonnes, a marketing-year high.

 

Iran continues to be a major buyer of U.S. hard red winter wheat, booking a total of 786,900 tonnes in the week ended Aug. 14, according to the USDA. The USDA had already announced last week that private exporters had sold 689,310 tonnes of HRW wheat to Iran, including 199,310 tonnes that were previously reported as unknown destinations.

 

The U.S. wheat seems to be getting a leg up in export business as it has significant quantities of high-quality wheat available, an analyst said. There are concerns about poor quality in parts of the Black Sea region and the E.U.

 

There also are worries about dryness in the Southern Hemisphere. The next significant chance for shower activity in Argentina appears to be next Wednesday into Thursday, DTN Meteorlogix said. In Australia, there is a chance for some rain through wheat areas of Victoria and New South Wales Thursday and Friday.

 

Bulls have regained fresh upside technical momentum in CBOT wheat, a technical analyst said. The market rallied Wednesday, with the CBOT December contract holding above major moving averages.

 

"There is talk that some major wheat-growing regions of the world could use rain and that was supportive," the technical analyst said. "However, my bias is still that the upside is limited at price levels at or above US$9.00 a bushel."

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$8.60. Bulls' next upside price objective is to push and close December wheat above solid resistance at last week's high of US$9.12 3/4, he said.

 

First resistance is seen at US$9.12 3/4 and then at US$9.25. First support lies at US$8.90 and then at US$8.75.