October 19, 2009

 

US Wheat Outlook on Monday: Seen up on overnight, follow-through

 

 

U.S. wheat futures are poised to open higher Monday amid follow-through buying from the overnight session and spillover support, traders said.

 

Chicago Board of Trade December wheat is called to open up 5 to 10 cents per bushel. In overnight electronic trading, CBOT December wheat jumped 7 3/4 cents to US$5.06 1/2.

 

Wheat rose overnight along with neighboring CBOT corn and soybeans. The row crops are finding support from worries about U.S. harvest delays and their strength could spill over into wheat, a trader said.

 

CBOT December wheat closed lower Friday on profit taking after prices rallied earlier last week. Bulls "still have some upside near-term technical momentum to suggest that a market low is in place" but need to "show fresh power soon," a technical analyst said.

 

Non-commercial speculative funds continue to hold a net short position in CBOT wheat. However, there are ideas that short-covering rallies, which helped support CBOT wheat early last week, may have run their course for now, an analyst said. Non-commercial speculative funds reduced their net short position to 47,603 contracts as of Oct. 13, down from 60,191 contracts as of Oct. 6, according to supplemental Commodity Futures Trading Commission reports.

 

The wheat markets are lacking bullish fundamental news to support strong gains, an analyst said. It's well known that world supplies are large.

 

There are some concerns that wet weather will continue to delay planting of U.S. soft red winter wheat, grown in the eastern third of the country and used to make pastries and snack foods. Rain and cool conditions are slowing the soybean harvest, and SRW wheat is often planted behind soybeans.

 

Hard red winter wheat in the central and southern U.S. Plains should benefit from a turn to warmer temperatures early this week before rain returns to the area, according to private weather firm DTN Meteorlogix. HRW wheat is used to make bread.

 

The U.S. Department of Agriculture is slated to issue an update on winter wheat plantings in its weekly crop progress report, due out at 4 p.m. EDT. A week ago, seeding was 64% complete, down from the average of 69%.

 

In Argentina, developing wheat will benefit from periodic showers and cooler temperatures, according to Meteorlogix. Drier weather in Australia this week will be favorable weather for wheat areas with adequate soil moisture, but moisture will be diminishing, 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, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at last week's high of US$5.29, he said.

 

First resistance is seen at Friday's high of US$5.11 1/4 and then at US$5.20, the analyst said. First support lies at Friday's low of US$4.95 1/2 and then at US$4.90, he said.