October 15, 2009

 

US Wheat Outlook on Thursday: Seen down on profit-taking, awaiting Egypt

 

 

Profit-taking is expected to weigh on U.S. wheat futures at the start of Thursday's day session, with traders thinking Egypt will look elsewhere to buy wheat in a tender.

 

Chicago Board of Trade December wheat is called to open down 6 to 8 cents per bushel. In overnight electronic trading, CBOT December wheat sank 7 1/2 cents to US$5.05 1/2.

 

Wheat is set to retrace recent rallies amid ideas that the markets are short-term overbought, a CBOT floor trader said. The gains were technically driven, without fundamental support, so wheat easily "falls under its own weight" when fund buying and short covering eases up, he said.

 

There are bearish ideas that higher prices chase away export business, a trader said. Competition for export sales is stiff because there is a lot of wheat to go around in the world.

 

It's expected that Egypt's state-owned General Authority for Supply Commodities will secure mostly Black Sea Russian wheat in a tender issued Wednesday, according to AgResource Company. U.S. offers are "priced out of the market," the firm said in a note.

 

French offers also are seen as too expensive. GASC is a major buyer on the world wheat market and known for being price sensitive.

 

"The tender should reflect the widening disparity between U.S. wheat prices and the world market," AgResource said.

 

The U.S. Department of Agriculture will issue weekly U.S. export sales data Friday, one day later than usual because of the Columbus Day holiday this week. In other export news, Japan bought 132,000 tonnes of wheat, including 90,000 tonnes from the U.S., in a routine tender.

 

Neighboring CBOT corn and soybean markets were lower overnight, which adds to the bearish tone in wheat, an analyst said. There are some ideas that U.S. harvest weather looks more favorable, although there are still concerns that cool, wet conditions will slow progress, a trader said.

 

The delayed soybean harvest is preventing producers from planting soft red winter wheat in some areas, traders said. Wheat is often planted behind soybeans in parts of the Midwest and Delta.

 

Outside markets aren't expected to have a strong influence on wheat, a trader said. The dollar is steady to firm, while crude oil is "bouncing around," he said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.75, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.40, he said.

 

First resistance is seen at Wednesday's high of US$5.29 and then at US$5.40, the technical analyst said. First support lies at Wednesday's low of US$5.05 and then at US$5.00, he said.