September 4, 2009

 

US Wheat Outlook on Friday: Seen down on lackluster export demand

 

 

U.S. wheat futures are poised to start lower Friday on a lack of export demand and on technical pressure after setting fresh contract lows Thursday.

 

Chicago Board of Trade December wheat is called to open steady to 4 cents per bushel lower. In overnight electronic trading, CBOT December wheat slipped 3/4 cent to US$4.78.

 

There is a lack of fresh fundamental news out for the markets ahead of the long U.S. Labor Day weekend, traders said. The CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange will be closed Monday for the holiday.

 

Export demand for U.S. wheat remains lackluster, and there are plenty of sellers looking to move wheat, an analyst said. The markets are searching for a pickup in export business to give the markets a boost, although the demand front was quiet overnight, traders said.

 

"It looks quiet for all the markets at the moment," said Tom Leffler, owner of Leffler Commodities. "You usually don't expect a whole lot in front of a three-day weekend. I expect today's volume to be light."

 

Traders continue to keep an eye on Australia amid worries that El Nino could cause unfavorable dryness and trim production potential. Patchy overnight rainfall in parts of eastern Australia will likely result in a downgrading of wheat production estimates below 21 million tonnes, some industry participants said.

 

The markets aren't getting too worked up about the possibility yet, as global demand has been sluggish and world supplies are large, an analyst said. Australia has traditionally been a major wheat exporter on the world market.

 

Showers of 0.10-0.60 inch hit some previously dry areas of the northern New South Wales wheat belt during the past 24 hours, according to private weather firm DTN Meteorlogix. Showers may cover more of northern New South Wales on Friday and also some of southeast Queensland before drier weather returns Friday night, the firm said.

 

"Jointing to reproductive wheat will benefit from this rain but more is still needed," Meteorlogix said.

 

In the northern U.S. Plains, maturing spring wheat and harvest activity will benefit from mostly above-normal temperatures through at least next Friday, Meteorlogix said. Showers early next week favor the east and may cause a few harvest delays, the firm said.

 

Traders are focused on "good yields coming out of North Dakota and the unusually good harvest weather this late in the crop year allowing for farmers to make good progress," according to a note from Benson Quinn Commodities. Forecasts for large U.S. corn and soybean crops "will help keep pressure on the wheat markets," unless crops are threatened by an early frost or freeze, the note said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.50, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.16 1/2, he said.

 

First resistance is seen at Thursday's high of US$4.93 1/2 and then at US$5.00. First support lies at Thursday's contract low of US$4.75 1/4 and then at US$4.65.