October 5, 2009

 

US Wheat Outlook on Monday: Flat-slightly up after rising overnight

 

 

U.S. wheat futures are poised to start steady to slightly higher Monday after rising a bit overnight, although traders said the markets should remain range bound.

 

In overnight electronic trading, Chicago Board of Trade December wheat edged up 1 1/4 cents to US$4.42 1/2 per bushel.

 

There was "little fresh news" for the markets to digest during the weekend, according to a note from Country Hedging. Prices have sagged lately as it is well known that world supplies are large and export demand has been sluggish.

 

The markets could bounce after recent losses, with non-commercial speculative funds still holding a large net short position in CBOT wheat, an analyst said. CBOT December wheat in electronic trading Friday hit a new contract low of US$4.39 1/4, below the previous low of US$4.39 1/2, set Wednesday.

 

However, fundamentals don't support an extended rally, traders said. "Rallies in wheat are meant to be sold until proven otherwise," said Dave Lehl, analyst for Benson Quinn Commodities.

 

Uncertainty about when the CBOT will begin a new storage rate system for CBOT wheat continues to keep the market on edge, traders said. Federal regulators must approve the new system and a date for implementation, but the CBOT and a Commodity Futures Trading Commission subcommittee have recommended different timelines.

 

The next downside price objective for bears is pushing and closing CBOT December wheat below solid technical support at US$4.25, a 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 US$4.50 and then at Friday's high of US$4.54. First support lies at Friday's contract low of US$4.39 1/4 and then at US$4.30.

 

Traders are looking ahead to the release of the U.S. Department of Agriculture's October supply/demand and production reports on Friday. The USDA will issue its weekly crop progress report at 4 p.m. EDT Monday, including estimates on winter wheat planting.

 

Periodic shower activity in the central and southern Plains 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, private weather firm DTN Meteorlogix said.

 

In Argentina, any rain Monday will mainly occur in eastern Buenos Aires and Sante Fe. The next chance for showers appears to be during the weekend, when rainfall should be more widespread, according to Meteorlogix.

 

Dryness "continues to impact filling wheat" in Australia's northern New South Wales and southern Queensland, Meteorlogix said. There is no significant rain forecasted for the area, according to the firm.

 

A few significant showers were reported over dry areas of southeastern Ukraine during the weekend. The moisture is "beneficial," but more widespread rain is needed after a dry summer, according to Meteorlogix. Forecasts look mainly dry this week.