August 28, 2009

 

US Wheat Outlook on Friday: Seen up 2-4 cents; choppy trade expected

 

 

U.S. wheat futures are expected to start higher Friday on spillover support from soybeans, although trading should be choppy as the markets lack a strong story, traders said.

 

Chicago Board of Trade December wheat is called to open 2 cents to 4 cents per bushel higher. In overnight electronic trading, CBOT December wheat was up 3 1/4 cents at SU$5.06 1/4.

 

Wheat should feel some borrowed strength from gains in soybeans, which helped the grains rise overnight, traders said. Soybeans and corn are both expected to start stronger. The markets sometimes trade together because funds trade in a basket of commodities.

 

However, activity in wheat could be "sloppy" as the markets do not have a strong fundamental storyline like soybeans do, a CBOT floor trader said. Nearby soybeans have climbed recently on worries about tight old-crop supplies.

 

World supplies for wheat, on the other hand, are considered ample. Export demand for U.S. wheat started off slow this marketing year due to large supplies and competition for business from other countries.

 

It's difficult for wheat to rally "with the world numbers where they're at," a market analyst said.

 

National Australia Bank Ltd. kept its forecast for Australia's production unchanged from last month at 23.2 million tonnes. Traders are keeping an eye on Australia amid worries that El Nino could potentially turn conditions too dry.

 

Showers are possible during the weekend or on Monday in New South Wales and Queensland, according to private weather firm DTN Meteorlogix. However, compared to earlier this week, the chance for rain has declined, and the rainfall may be lighter than earlier expected, the firm said in a forecast.

 

The weather in the U.S. northern Plains, where hard red spring wheat is grown, will favor maturing crops and harvests at least for seven days, Meteorlogix said. Long-range charts suggest a chance for wet weather developing next weekend - which can slow cutting.

 

In outside markets, activity in the U.S. dollar is "uneventful," a trader said. A weak dollar can be supportive for wheat because it makes U.S. grains more attractive to foreign buyers.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at the contract low of SU$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 SU$5.32 3/4, he said.

 

First resistance is seen at SU$5.10 1/2 and then at SU$5.16 1/2, the analyst said. First support lies at SU$4.92 and then at SU$4.85 3/4, he said.