September 17, 2009

 

US Wheat Outlook on Thursday: Seen 2-4 cents lower, watching corn, soy

 

 

Pressure from neighboring markets and a lack of supportive news are expected to weigh on U.S. wheat futures at the start of Thursday's day session.

 

Chicago Board of Trade December wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT December wheat dropped 2 3/4 cents to US$4.64 1/2.

 

Wheat should feel spillover pressure from weak CBOT corn and soybeans, traders said. The row crops were lower overnight and are watching weather forecasts, which have backed off on the threat of a U.S. frost, they said.

 

Trading should be choppy for the grains because the row crops are in a weather market, an analyst said. CBOT wheat should continue to drift, with a lot of "air pockets" seen in the market, a trader said.

 

Noncommercial speculative funds continue to hold a large net short position in CBOT wheat. That could open the door for some short covering, particularly if the neighboring markets rally, a trader said.

 

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 US$5.00, he said.

 

First resistance is seen at Wednesday's high of US$4.73 3/4 and then at this week's high of US$4.81 1/2, the analyst said. First support lies at Wednesday's low of US$4.56 1/4 and then at the contract low of US$4.50, he said.

 

Strength in the U.S. dollar is seen as bearish for the grains, as it makes U.S. wheat less attractive to foreign buyers, a trader said. Crude oil is weaker, which adds to the bearish tone.

 

There was no news out overnight that altered the bearish fundamental storyline for wheat, traders said. World supplies remain large, and export demand for U.S. wheat needs to accelerate, they said.

 

Weekly U.S. wheat export sales of 449,400 tonnes were within trade expectations of 350,000 tonnes to 550,000 tonnes. Sales were down 19% from the previous week and 9% from prior four-week average, according to the U.S. Department of Agriculture.

 

Japan, meanwhile, bought 117,000 tonnes of wheat, including 75,000 tonnes from the U.S., in a routine tender. The wheat is expected to arrive Nov. 1-13.

 

In other news, the outlook for wheat in South Australia got a boost by widespread rainfall. These latest rains will bolster crops ahead of the critical spring growth period and suggest this week's official crop production forecasts could have upside potential, analysts said.

 

Traders have been keeping an eye on Australia amid worries that El Nino could cause an unfavorable drought. However, producers Down Under don't need to produce a blockbuster crop to keep global supply levels comfortable because world ending stocks are already adequate, analysts said.