September 25, 2009

 

US Wheat Outlook on Friday: Seen starting mixed in consolidation

 

 

U.S. wheat futures are expected to start mixed Friday as the markets continue to consolidate, with some positioning possible ahead of the weekend, analysts said.

 

In overnight electronic trading, Chicago Board of Trade December wheat slipped 1 cent to US$4.72 per bushel.

 

The markets are expected to remain in their recent range amid a lack of fresh fundamental news for the markets, traders said. It's known that world supplies are large, although there is some optimism that export demand is picking up, an analyst said.

 

A Moroccan tender for 600,000 tonnes of U.S. wheat and "good weekly export sales" were friendly to CBOT wheat on Thursday, said Mike Zuzolo, president of Global Commodity Analytics & Consulting. CBOT December wheat broke a four-month resistance trendline on the close Thursday, he said.

 

The "big issue" for Friday is whether the market will see pre-weekend profit-taking and whether CBOT December wheat slips back below US$4.60, Zuzolo said. That would be "very counter-productive given the technical 'buy' signals in the daily chart," he said.

 

It was "a bit encouraging" for wheat bulls that the markets ended higher despite weakness in outside markets, a technical analyst said. Wheat bears still have the overall near-term technical advantage, he said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.25, the technical analyst said. The 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 Thursday's high of US$4.74 and then at US$4.81 1/2, the analyst said. First support lies at US$4.60 and then at the contract low of US$4.50, he said.

 

Looking at the weather, favorable harvest weather continues through early next week for spring wheat in the U.S. northern Plains, according to private weather firm DTN Meteorlogix. However, long-range charts suggest a chance for rain during the middle of the week and possibly heavy rain, it said.

 

In the central and southern Plains, periodic shower activity will favor germination and early growth of hard red winter wheat, while intervals of drier and warmer conditions allow for good planting progress in most areas, Meteorlogix said.

 

In Argentina, episodes of light to moderate rain during the weekend and early next week will favor early developing wheat, the firm said. However, the best chance for significant rains from these chances is mostly for northern and eastern areas and not so much for La Pampa and southwest Buenos Aires, according to the forecast.

 

Rains this week hit some important wheat areas in South Australia, Victoria and New South Wales, which helps improve the outlook for crops, according to Meteorlogix. The forecast continues to feature some colder weather for the southeast crop areas later this weekend and early next week.

 

Australian wheat production this year will reach 21.8 million tonnes, with a strong outlook in southern regions expected to partially offset losses in the north, marketing advisory service Profarmer Australia said. If achieved, that would be up from an actual output of 21.4 million tonnes last year.