October 1, 2009

 

US Wheat Outlook on Thursday: Down in setback from Wednesday's gains

 

 

U.S. wheat futures are called to start lower Thursday in a setback from a late rally Wednesday and amid a lack of fundamental support.

 

Chicago Board of Trade December wheat is called to open 5 to 7 cents per bushel lower. In overnight electronic trading, CBOT December wheat fell 5 1/2 cents to US$4.52 per bushel.

 

Wheat fell overnight after closing higher Wednesday on positioning at end of the month and end of the quarter. The markets lack supportive fundamentals to push prices higher, analysts said.

 

"Wheat should open weaker today, with some buyer's remorse noted in the wake of yesterday's rally," Farm Futures said in a market comment.

 

The U.S. Department of Agriculture on Wednesday pegged U.S. wheat stocks as of Sept. 1 above market expectations. The larger-than-expected supply "should provide resistance to the wheat market," according to a note from Country Hedging.

 

Total weekly U.S. wheat export sales of 426,700 tonnes were within estimates of 350,000 to 550,000 tonnes. Net sales of 538,200 tonnes for delivery in 2009-10 were up 6% from the previous week and 13% from the prior four-week average, according to the USDA. A CBOT floor trader termed the export sales as "solid."

 

In other news, Deutsche Bank AG said it's restructuring its giant PowerShares commodity-tracking funds amid a crackdown by U.S. regulators on holdings of individual commodities. Positions of corn, sugar and wheat futures in the PowerShares DB Agriculture Fund will be halved to satisfy Commodity Futures Trading Commission position limits.

 

The announcement is seen as "just another negative for wheat," a CBOT floor trader said. Wheat has struggled under the pressure from large world supplies and lackluster export demand.

 

"The Deustche Bank announcement may lead to liquidation of some wheat contracts," Country Hedging 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$4.60 and then at US$4.75, the analyst said. First support lies at Wednesday's contract low of US$4.39 1/2 and then at US$4.30.