September 8, 2009

 

US Wheat Outlook on Tuesday: Seen steady to up; outside markets support

 

 

U.S. wheat futures are expected to start steady to higher Tuesday as supportive signals from outside markets encounter wheat's weak fundamental storyline, traders said.

 

In overnight electronic trading, Chicago Board of Trade December wheat crept 1/4 cent higher to US$4.72 a bushel.

 

Strength in crude oil and gold and weakness in the U.S. dollar are seen as supportive for the grains. CBOT soybeans climbed overnight on leadership from the outside markets, and early strength in wheat would be "macro-driven," a CBOT floor trader said.

 

Wheat's fundamentals remain weak as there are ample supplies in the world and heavy competition for export business, the trader said. Rallies in U.S. wheat futures would make the U.S. less competitive in the global market, he said.

 

In export news, Japan said it is seeking 133,000 tonnes of wheat, including 70,000 tonnes from the U.S., in a routine tender to be concluded Thursday. The wheat is expected to arrive Nov. 1-13.

 

Traders continue to keep an eye on Australia, which could struggle with dryness in some areas due to El Nino, meteorologists said. The worries are nothing for the markets to get too "bulled up" about at this point because world supplies are comfortable and there is still time left in Australia's growing season, a trader said.

 

Rainfall late last week and early in the weekend occurred with good coverage through wheat areas in northern New South Wales and extreme south Queensland, according to private weather firm DTN Meteorlogix. The moisture will help ease stress to jointing and early reproductive wheat, but the region looks to have mostly dry conditions during the next seven days, Meteorlogix said.

 

Scattered showers and thunderstorms brought 0.3 to 1.5 inches of moisture, with locally heavier totals, through a good portion of Argentina during weekend, forecasters said. Conditions should be mostly dry during the next week, according to Meteorlogix.

 

In the U.S., rain and thunderstorm activity may mean spring wheat harvest delays this week in the northern U.S. Plains, especially through eastern and southern locations, Meteorlogix said. Episodes of scattered thunderstorms will help replenish soil moisture for early growth of winter wheat in the central and southern Plains, the weather firm said.

 

Technical charts for wheat look poor as the markets last week continued to set new contract lows, a trader said. Wheat bears have the solid overall near-term technical advantage, a technical analyst said.

 

"Prices are still in a three-month-old downtrend on the daily bar chart," he 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. The bulls' next upside price objective is to push and close the contract above solid technical resistance at last week's high of US$5.02, he said.