September 10, 2009

 

US Wheat Outlook on Thursday: Seen starting steady, searching for story

 

 

U.S. wheat futures are expected to start steady Thursday as the markets grapple with the lack of a fresh fundamental story and a muted influence from outside markets, traders said.

 

In overnight electronic trading, Chicago Board of Trade December wheat edged up 1/2 cent to US$4.56 3/4 a bushel.

 

There is "no real story" for wheat traders to get excited about as world supplies remain comfortable and importers are in no rush to make purchases, a CBOT floor trader said. Volume in the grains was light overnight ahead of government crop reports due out at 8:30 a.m., EDT Friday, he said.

 

The U.S. Department of Agriculture's supply/demand and crop production reports will be more important for corn and soybeans than for wheat, traders said. The USDA is likely to wait until it issues a small grains report Sept. 30 before making any major adjustments to wheat estimates, they said.

 

Traders continue to keep an eye on weather in Australia as the wheat crop enters the key growing season. There are worries that El Nino may cause unfavorable dryness, but Australia's agriculture minister said recent rains had helped revive plants in southern Queensland and northern New South Wales.

 

In Argentina, which is also struggling with dryness, the Buenos Aires Cereals Exchange said wheat got a boost from rain last week but that cold weather may slow crop development. Argentina looks as though it will remain mostly dry through Monday before a few showers arrive Tuesday or Tuesday night, according to private weather firm DTN Meteorlogix.

 

Australia and Argentina have historically been two of the world's top exporters of wheat. However, their ability to produce big crops is less important this year because world supplies are large and the Northern Hemisphere has already harvested another big crop, analysts said.

 

In export news, Morocco's state wheat buyer said it would tender Oct. 6 to buy 278,000 tonnes of soft milling wheat from its domestic market. Japan said it purchased 133,000 tonnes of wheat, including 70,000 tonnes from the U.S., in a routine tender. The Taiwan Flour Mills Association purchased 54,300 tonnes of U.S. wheat from trading company Columbia Grains for delivery, an official said

 

Outside markets look "subdued," with crude oil rising a bit and the U.S. dollar slipping, a trader said. A weak dollar is generally seen as supportive because it makes U.S. grains more attractive to foreign buyers, but wheat has shrugged off activity in the dollar this week.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.25, a technical analyst said. 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.

 

First resistance is seen at Wednesday's high of US$4.63 3/4 and then this week's high of at US$4.75 3/4, the technical analyst said. First support lies at Wednesday's contract low of US$4.52 3/4 and then at US$4.50, he said.