October 16, 2009

 

US Wheat Outlook on Friday: Seen up slightly after rising overnight

 

 

U.S. wheat futures are expected to start slightly higher Friday on pre-weekend positioning and in a bounce from Thursday's setback, although the markets could trade both sides, 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 1/2 cents to US$5.07 1/2.

 

Wheat edged higher overnight after slipping Thursday in a retreat from recent gains. The markets had found strength recently from technical buying and short-covering, traders said.

 

On Friday, "wheat tries to bounce back from yesterday's selling, with traders wondering if the recent rally has run out of steam," said Bryce Knorr, analyst for Farm Futures.

 

Non-commercial speculative funds continue to hold a large net short position, which could open the door for more short-covering. However, one analyst said he thought the markets would need bullish news to ignite another rally.

 

Wheat has seen "mixed signals" on the demand front this week, Knorr said. Egypt on Thursday booked French wheat in a tender and snubbed the U.S., but Iraq earlier in the week bought 200,000 tonnes of U.S. hard red wheat.

 

Weekly U.S. wheat export sales, issued Friday, were 480,200 tonnes, which was within trade expectations of 400,000 tonnes to 600,000 tonnes. Export sales were down 37% from the previous week and 14% from the prior four-week average, according to the U.S. Department of Agriculture.

 

Sales of soft red winter wheat, traded at the CBOT, were weak at 36,800 tonnes. It seems as though buyers are looking more toward higher protein varieties like hard red spring and hard red winter wheat, a trader said.

 

The supply outlook continues to look bearish, with global wheat stocks considered ample, analysts said. Large world supplies have encouraged stiff competition for export business on the world market.

 

In other news, fund reallocations from Deutsche Bank are expected to start Monday and last 10 days, according to a note from Benson Quinn Commodities. The reallocations are suspected to involve liquidation of long positions in the Chicago July 2010 contract, the firm 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 Thursday's high of US$5.13 3/4 and then at this week's high of US$5.29. First support lies at Thursday's low of US$4.96 1/4 and then at US$4.90.