September 2, 2009

 

US Wheat Outlook on Wednesday: Down 1-3 cents as neighboring markets weigh

 

 

U.S. wheat futures are expected to open lower Wednesday, as the market continues to be pressured by corn and soybeans and a lack of its own supportive news.

 

Benchmark Chicago Board of Trade wheat is called 1 to 3 cents lower. In overnight trade, September CBOT wheat was down 1 3/4 cents to US$4.57 1/2 per bushel and December wheat was down 1 3/4 cents to US$4.85 1/2.

 

Outside macro markets are seen as mixed Wednesday, but the neighboring corn and soybean markets expected to open lower, which should pressure wheat.

 

A trader said the wheat market is "just getting dragged along for the ride."

 

"It's hard to rally wheat when everything else is getting pummeled," a trader said.

 

The December CBOT contract closed at a fresh contract low lose on Tuesday, as prices remain in a three-month-old downtrend, a technical analyst said.

 

The next downside price objective for the bears is pushing and closing December prices below solid technical support at US$4.50, the technical analyst said. The bulls' next upside price objective is to push and close December futures prices above solid technical resistance at the July low of US$5.32 3/4 a bushel.

 

First resistance is seen at this week's high of US$5.02 and then at last week's high of US$5.16 1/2. First support lies at the contract low of US$4.80 3/4 and then at US$4.75.

 

Heavy deliveries were reported again Wednesday, with 4,359 reported against the September CBOT futures contract.

 

In international news, Australian analysts Wednesday began lowering national wheat production forecasts in light of poor growing conditions in northern New South Wales and Queensland and a continuing El Nino climate episode.

 

Two analysts now put wheat output projections around 20 million to 21 million metric tonnes, down from estimates last week of 22 million to 23 million tonnes, but they still say production could go either way depending on rainfall.

 

Traders said the concerns about a smaller crop are supportive, but that it's too soon to rally the market given that September is an important month for the crop. One trader said that "building a bull case on that is a little far-fetched."

 

The trade is also monitoring weather and the crop in Argentina.

 

In other news, analysts noted that Egypt tendered for a cargo of optional origin wheat after the market closed Tuesday.