September 22, 2009

 

US Wheat Outlook on Tuesday: Seen up on neighboring, outside markets

 

 

Supportive signals from neighboring and outside markets are expected to lift U.S. wheat futures at the start of Tuesday's day session.

 

Chicago Board of Trade December wheat is called to open 4 cents to 6 cents per bushel higher. In overnight electronic trading, CBOT December wheat rose 6 1/2 cents to US$4.62 1/2.

 

Gains expected in neighboring CBOT corn and soybeans should help set a bullish tone for wheat, traders said. Weakness in the U.S. dollar adds support as it makes U.S. wheat more attractive to foreign buyers, they said.

 

Non-commercial speculative funds continue to hold a large net short position in CBOT wheat, which could open the door for some short-covering, a trader said. However, there is not much fresh fundamental news out to support the market, an analyst said. World supplies are still seen as large, which is a bearish influence on prices.

 

Traders are keeping an eye on Australia amid uncertainty about the size of its crop. Cool temperatures in New South Wales could "nip at reproducing wheat," AgResource Company said in a note.

 

The markets had been monitoring rainfall Down Under amid worries about the potential for dryness to reduce output, although those concerns are easing, analysts said. Rains early this week will favor jointing to reproductive wheat in South Australia, Victoria, and south and central New South Wales, according to private weather firm DTN Meteorlogix.

 

"We may need to keep an eye on temperatures behind this rain as it looks fairly cool," Meteorlogix said. "Reproductive wheat would be at risk if temperatures fall below freezing."

 

Weather continues to look favorable for the ongoing U.S. spring wheat harvest, analysts said. Harvest activity will benefit from mostly above normal temperatures and little rainfall during the next seven days, Meteorlogix said.

 

As of Sunday, 85% of the spring wheat was harvested - down from the five-year average of 96%, according to the U.S. Department of Agriculture. Cutting is behind schedule after the crop was planted late in the spring.

 

The USDA reported 24% of U.S. winter wheat was planted as of Sunday, up from 13% last week and just shy of the five-year average of 25%. Episodes of scattered thunderstorms in the central and southern Plains will benefit soil moisture for early growth of hard red winter wheat, according to Meteorlogix.

 

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 Monday's high of US$4.63 and then at US$4.75, the analyst said. First support lies at the contract low of US$4.50 and then at US$4.40.