August 27, 2009

 

US Wheat Outlook on Thursday: Seen up on short-covering, export demand

 

 

Short-covering and larger-than-expected export sales are expected to support U.S. wheat futures early Thursday, traders said.

 

Chicago Board of Trade December wheat is called to open 1 to 2 cents per bushel higher. In overnight electronic trading, CBOT December wheat gained 1 3/4 cents to US$5.08 1/2.

 

The markets could extend gains on technical buying after bouncing Wednesday, analysts said. Non-commercial speculative funds continue to hold a large net short position in CBOT wheat.

 

There is some bullishness about demand after the U.S. made sales to Egypt in its two most recent tenders. Weekly U.S. wheat export sales of 652,700 tonnes were a marketing-year high and above trade estimates of 300,000 to 500,000 tonnes.

 

The sales were up 82% from the previous week and 33% from prior four-week average, according to the U.S. Department of Agriculture. Top buyers for the week included Nigeria, which took 222,500 tonnes, and Japan, which bought 89,500 tonnes.

 

It seems as though export demand is "turning a corner" after a slow start to the marketing year, an analyst said. However, others said it was too early to get overly bullish.

 

"I sure as heck don't see enough to get me excited when you see the amount of stocks we have," said Tom Leffler, owner of Leffler Commodities. "Realistically, I just don't see the wheat market ready to take off."

 

World wheat ending stocks are considered ample and are more than enough to meet demand, analysts have said. There is competition for export business on the world market because of large world supplies.

 

In other news, Japan said it bought 160,000 tonnes wheat, including 97,000 tonnes from the U.S., in a tender. The wheat is expected to arrive Oct. 16 to Nov. 15.

 

Harvests continues to lag "significantly behind" average in the U.S. northern Plains, mostly due to the lateness of the spring wheat crop, according to private weather firm DTN Meteorlogix. The weather will favor maturing crops and harvests at least for seven days, the firm said.

 

In Australia, showers are possible during the weekend or Monday in northern New South Wales and Queensland, which need moisture to maintain yield potential, according to Meteorlogix. After Monday, the regions look to turn drier again, the firm said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at the contract low of US$4.85 3/4, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at the July low of US$5.32 3/4, he said.

 

First resistance is seen at Wednesday's high of US$5.09 1/2 and then at this week's high of US$5.16 1/2. First support lies at Wednesday's low of US$4.97 and then at the contract low of US$4.85 3/4.

 

Outside markets, such as the U.S. dollar and crude oil, aren't providing much direction to the grains, traders said.