October 12, 2009

 

US Wheat Outlook on Monday: Up on spillover support, short-covering

 

 

Support from other markets and short-covering are expected to carry U.S. wheat futures higher at the start of Monday's day session, traders said.

 

Chicago Board of Trade December wheat is called to open 8 to 10 cents per bushel stronger. In overnight electronic trading, CBOT December wheat climbed 10 3/4 cents US$4.78 3/4.

 

Expected gains in corn and soybeans should help lift wheat as the row crops find strength from worries about weather and harvest delays, traders said. Weakness in the U.S. dollar adds support because it makes U.S. grain more attractive to foreign buyers, they said.

 

"New index fund money is freely flowing into the markets, which in turn is driving prices higher," said Brian Hoops, president of Midwest Market Solutions. "Since the start of the new quarter in October, prices have marched higher on a combination of harvest delays and new index fund buying."

 

Noncommercial speculative funds continue to hold a large net short position in CBOT wheat. They were net short 60,191 contracts as of Oct. 6, up from 59,276 contracts as of Sept. 29, according to a supplemental report from the Commodity Futures Trading Commission.

 

Wheat's fundamental storyline remains weak. The world has plenty of wheat to go around, and export demand for U.S. wheat has been lackluster.

 

Saudi Arabia during the weekend bought 550,000 tonnes of hard Canadian wheat, the fourth and last purchase of wheat imports to the kingdom this year, according to the official Saudi news agency. The shipment is slated to reach Saudi Arabia in December.

 

On the supply side, the U.S. Department of Agriculture on Friday pegged 2009-10 U.S. wheat ending stocks at a nine-year high of 864 million bushels, up from its September estimate of 734 million. Traders were expecting stocks to grow, but the increase topped the average of pre-report estimates.

 

South Australia's wheat crop, meanwhile, could reach a record 4.8 million metric tonnes set in 2001-02, according to a crop consultant to the state's Primary Industries Department. Most wheat in the state has enough available soil moisture to take it through to harvest, which gets underway in earnest in November, he said.

 

Recently planted hard red winter wheat in the central and southern U.S. Plains will mostly benefit from rain in the area, according to private weather firm DTN Meteorlogix. Rain will delay seeding in southern and eastern areas, while cold temperatures slow growth and may burn back some emerged wheat in the north, the firm said in a forecast.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at the contract low of US$4.39 1/4, 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 Friday's high of US$4.74 1/4 and then at last week's high of US$4.83, he said. First support lies at Friday's low of US$4.61 and then at US$4.50, he said.