September 22, 2008

 

US Wheat Outlook on Monday: 10-15 cents higher on firm outside markets

 

 

Firm neighboring and outside markets are expected to lead U.S. wheat futures higher at the start of Monday's day session.

 

Chicago Board of Trade December wheat is called to open 10 to 15 cents per bushel higher. In overnight electronic trading, CBOT December wheat climbed 14 1/4 cents to US$7.32 1/4.

 

Strength in CBOT corn and soybeans and in outside markets, such as crude oil and gold, should create a bullish tone for wheat, analysts said. Weakness in the U.S. dollar adds support, as it gives foreign importers more buying power, they said.

 

"Wheat is following corn and soybeans," Midwest Market Solutions said in a note to clients.

 

Wheat could find support from short-covering, a CBOT trader said. Speculative funds were net short 39,760 contracts in CBOT wheat futures and options as of Sept. 16, according to a supplemental report from the Commodity Futures Trading Commission.

 

However, the markets' fundamental outlook remains bearish, an analyst said. Despite a solid weekly export sales report last week, the markets are focusing on forecasts for record world production in 2008-09, a CBOT trader said.

 

"Demand will be needed to sustain a rally," Midwest Market Solutions said.

 

Australia's wheat exports are expected to surge during the fiscal year ending June 30 due to an improved harvest, the Australian Bureau of Agricultural and Resource Economics said. Australia's production, a key determinant of export availability, is forecast to rise to 22.5 million from a drought-reduced 13.0 million tonnes during the last crop year, it said.

 

A cold front is expected to produce moderate rains through important wheat areas of Australia's New South Wales early this week, possibly reaching to southern Queensland, DTN Meteorlogix said. A second cold front may produce light showers through West Australia's wheat belt later in the week, the private weather firm said.

 

More rain is needed for developing wheat in central Argentina, especially in Cordoba, Santa Fe and northern Buenos Aires. The Meteorlogix forecast calls for mainly dry conditions during the next seven days.

 

CBOT December wheat Friday closed higher, but prices are still in a four-week-old downtrend on the daily bar chart, a technical analyst said. Prices have slipped since a spike high Aug. 21.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at last week's low of US$6.86 1/4, the analyst said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at US$7.50, he said.

 

First resistance is seen at Friday's high of US$7.22 1/2 and then at last week's high of US$7.39 1/2. First support lies at US$7.14 and then at US$7.00.