September 28, 2009

 

US Wheat Outlook on Monday: Seen up in bounce from friday slide

 

 

U.S. wheat futures are poised to start higher Monday in a rebound from sharp losses Friday.

 

Chicago Board of Trade December wheat is called to open 2 to 4 cents per bushel higher. In overnight electronic trading, CBOT December wheat rose 3 1/4 cents to US$4.53.

 

The overnight bounce followed a sell-off Friday that dragged prices down toward the bottom end of their range, a trader said. CBOT December wheat on Friday set a new contract low of US$4.48 1/2.

 

The markets look oversold and due for a recovery following the slide, a CBOT trader said. Prices "just got beaten up so bad," he said.

 

Still, uncertainty about potential changes to the CBOT wheat contract continue to hang over the market, analysts said. Federal regulators are considering a new storage rate mechanism for the contract to improve cash-futures convergence, but it's not known when they will implement any changes. A Commodity Futures Trading Commission subcommittee has recommend implementation with the December contract, but others say that is too soon.

 

The bulls' next upside price objective is to push and close CBOT December wheat prices above solid technical resistance at US$4.81 1/2, a technical analyst said. The next downside price objective for the bears is pushing and closing the contract below solid technical support at US$4.25, he said.

 

First resistance is seen at US$4.60 and then at US$4.70. First support lies at the contract low of US$4.48 and then at US$4.40, the technical analyst said.

 

In other news, the Grain Board of Iraq issued a tender Monday to buy at least 100,000 tonnes of hard wheat, an official said. Offers are due by Oct. 4 and should be valid until Oct. 11, he said.

 

Looking at the weather, Argentina's wheat crop condition has improved significantly in recent weeks as spring rainfall has hit much of the farm belt, according to the Agriculture Secretariat's weekly crop report. Planted area is down sharply this season due to drought and political issues, and output is expected to plunge.

 

In the U.S., there is a chance for frost over parts of the northern and eastern Dakotas and in north Minnesota Monday night, according to private weather firm DTN Meteorlogix. Spring wheat harvest is wrapping up in the area. It wouldn't be a big deal if the cold nips a few bushels, because growers are pulling in a big crop, a trader said.

 

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

 

There is a chance for frost in parts of Australia's Victoria and southern New South Wales on Monday, but it does not look cold enough to significantly impact wheat, according to Meteorlogix. Showers should redevelop in the west today and Tuesday. Rain is still needed in northeast wheat areas, but no significant rain is expected, the firm said.