October 8, 2009

 

US Wheat Outlook on Thursday: Up 5-7 cents on spillover support, exports

 

 

Support from other markets and solid weekly export sales are expected to boost U.S. wheat futures at the start of Thursday's day session, traders said.

 

Chicago Board of Trade December wheat is called to open 5 to 7 cents per bushel higher. In overnight electronic trading, CBOT December wheat jumped 6 cents to US$4.69 1/4.

 

Wheat should feel spillover strength from expected gains in neighboring CBOT corn and soybeans, traders said. Weakness in the U.S. dollar is friendly for the grains as it makes them more attractive to foreign buyers, they said.

 

Weekly U.S. wheat export sales of 767,300 tonnes for the week ended Oct. 1 topped expectations, which ranged from 400,000 tonnes to 600,000 tonnes. Sales were up 43% from the previous week and 52% from the prior four-week average, according to the U.S. Department of Agriculture.

 

Of the total, sales of soft red winter wheat looked unimpressive at 52,800 tonnes, a trader said. It seems as though buyers are focusing on higher-protein wheat, he said.

 

Iraq, meanwhile, has booked 200,000 tonnes of U.S. wheat in a tender, according to a media report. There has been chatter in the markets about the purchase, a CBOT trader said.

 

In other export news, Japan said it bought 149,000 tonnes of wheat, including 86,000 tonnes from the U.S., in a routine tender. Its Ministry of Agriculture is separately seeking 52,200 tonnes of wheat and 31,700 tonnes of barley in a simultaneous buy-sell, or SBS, tender.

 

CBOT December wheat has closed higher for the past three sessions. Short-covering has been supportive for the market, as non-commercial speculative funds continue to hold a large net short position, a trader said.

 

Fundamentals are seen as weak due to large world supplies, and a technical analyst said bears still have the solid overall near-term technical advantage in the market. However, "bulls would start looking really strong" if CBOT December wheat pops above 4.77 1/4 and 4.81 1/2, according to FuturesTechs.

 

Traders are awaiting Friday morning's USDA supply and demand report, which will include updates on U.S. wheat carryout and world production. Positioning could be a feature before the report comes out, a trader said. U.S. ending stocks are expected to increase from September.

 

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 this week's high of US$4.71 1/2 and then at US$4.81 1/2. First support lies at Wednesday's low of US$4.53 3/4 and then at US$4.50.

 

Looking at the weather, periodic shower activity will favor germination and early growth of hard red winter wheat in the central and southern Plains, according to DTN Meteorlogix. Rain may slow planting progress in southern and eastern areas, while cold temperatures slow germination and emergence of recently planted wheat, the private weather firm said.