US Wheat Outlook on Wednesday: Seen slightly higher on follow-through

U.S. wheat futures are expected to start a few cents higher Wednesday after rising overnight and should keep an eye on other markets for direction, traders said.

 

Chicago Board of Trade December wheat is called to open up 1 cent to 3 cents per bushel. In overnight electronic trading, CBOT December wheat rose 2 cents to US$4.62 1/4.

 

Wheat is expected to maintain its role as a follower of CBOT corn, which was firmer overnight and led a rally in the grains Tuesday, a trader said. Wheat lacks its own fundamental story to support gains, he said.

 

Wheat has been in a downtrend for weeks amid pressure from large world supplies and lackluster export demand. There's still a lot of wheat to go around in the world, traders said.

 

There's a chance for wheat to break out of its downtrend, but it is still in place for now, said Dennis Gartman, publisher of the Gartman Letter. "It will take months of sideways movement to break that trend decisively," he said.

 

A test of US$4.77 1/4 "looks likely" after CBOT December wheat on Tuesday rallied to a session high of US$4.71 1/2, its highest price since Sept. 25, according to FuturesTechs. If prices retreat, support is seen at US$4.52, the firm said in a note.

 

"The bears still have the big picture on their side, but the question is when the long-term bear forces will overcome the recent strength," FuturesTechs 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 Tuesday's high of US$4.71 1/2 and then at US$4.81 1/2, the technical analyst said. First support lies at US$4.50 and then at the contract low of US$4.39 1/4, he said.

 

Traders are waiting for the U.S. Department of Agriculture to issue crop production and supply/demand reports at 8:30 a.m. EDT Friday. The reports are more important for corn and soybeans than for wheat, analysts said.

 

Looking at the weather, periodic shower activity will favor germination and early growth of hard red winter wheat in the central and southern U.S. Plains, while intervals of drier conditions allow for good planting progress in most areas, according to DTN Meteorlogix. Cold temperatures could slow germination and emergence of recently planted wheat, the private weather firm said.

 

In Australia, there is a chance for showers through West Australia's wheat belt during the weekend, Meteorlogix said. Showers may move into the east early next week but the forecast is somewhat uncertain, the firm said.

 

In Argentina, there is a chance for rain or thunderstorms during the weekend and early next week, Meteorlogix said. Rain helps improve the condition of wheat and builds moisture for early growth of corn and soybeans, the firm said.