September 3, 2009

 

US Wheat Outlook on Thursday: Up on overnight, but demand disappoints

 

 

U.S. wheat futures are expected to start slightly higher Thursday on follow-through buying from the overnight session but may struggle to sustain gains amid disappointment about export demand, analysts said.

 

Chicago Board of Trade December wheat is called to open 1 to 3 cents per bushel higher. In overnight electronic trading, CBOT December wheat edged up 2 1/2 cents to US$4.88 1/4.

 

Wheat rose overnight amid gains in neighboring CBOT corn and soybeans. Outside markets look "a little bit supportive" for the grains, with the U.S. dollar slipping and crude oil rising, said Larry Glenn, broker and analyst for Frontier Ag.

 

Total weekly U.S. wheat export sales of 406,100 tonnes were "a bit disappointing" and toward the low end of trade estimates, which ranged from 350,000 to 550,000 tonnes, Glenn said. Traders had hoped to see stronger sales after weekly export sales last week hit a marketing-year high and exceeded trade expectations.

 

Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, said Wednesday it bought 330,000 metric tonnes of wheat in a tender but only 60,000 tonnes from the U.S. The bulk of the purchase came from France.

 

In other export news, Japan said it bought 127,000 tonnes of wheat, including 85,000 tonnes from the U.S., in a routine tender concluded Thursday. The wheat is expected to arrive Oct. 16 to Nov. 15.

 

Amid disappointment about demand, Glenn said he was a "little concerned" whether the markets will be able to hold on to early gains. The markets are lacking fundamental strength to support a rally, he said.

 

"Our focus right now is on demand," he said. "We don't see much."

 

Non-commercial speculative funds continue to hold a large net short position in CBOT wheat, which could be supportive, a trader said. There could be some evening up of positions ahead of the long Labor Day weekend, a CBOT floor analyst said.

 

The next downside price objective for bears is pushing and closing CBOT December wheat below solid technical support at US$4.50, a technical analyst said. The 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 this week's high of US$5.02 and then at last week's high of US$5.16 1/2, the analyst said. First support lies at the contract low of US$4.80 3/4 and then at US$4.75, he said.

 

Looking at the weather, above-normal temperatures in the northern U.S. Plains during the next seven days will benefit maturing spring wheat and cutting, according to DTN Meteorlogix. Rain may develop and slow down the harvest early next week, the private weather firm said.

 

In Australia, there appears to be some chance for scattered to widely scattered showers Thursday and Friday from northern New South Wales to Queensland but probably not enough to reverse a recent drying trend, Meteorlogix said. Traders are worried dryness caused by El Nino could reduce Australia's output.