October 21, 2009

 

US Wheat Outlook on Wednesday: Seen 2-4 cents down, but may trade both sides

 

 

U.S. wheat futures are poised to start lower Wednesday on pressure from other markets but will likely trade both sides in choppy activity, traders said.

 

Chicago Board of Trade December wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT December wheat fell 2 1/2 cents to US$5.15.

 

Wheat should see another day of choppy trading after the market see-sawed between positive and negative territory on Tuesday, a CBOT floor trader said. Weakness in neighboring CBOT corn and soybeans and in outside markets like crude oil is setting a bearish tone for wheat, an analyst said.

 

Weather continues to look supportive for the grains and soybeans, as wetness is delaying the corn and soy harvests and preventing planting of soft red winter wheat, a trader said. Winter wheat was 69% planted as of Sunday, below the average of 78%, according to the U.S. Department of Agriculture.

 

"Seedings are being delayed because corn and soybeans fields have not yet been cleared," said Jerry Gidel, analyst for North America Risk Management Services. "If this situation persists for another 10-14 days, a significant portion of upcoming 2010 soft red wheat plantings might not occur."

 

Rain in the Midwest this week will further delay corn and soybean harvesting and SRW wheat planting, according to DTN Meteorlogix. The outlook for next week includes some risk for more heavy rains and more cool conditions, especially later in the week, the private weather firm said.

 

In the central and southern Plains, wheat development should benefit from warmer temperatures during the weekend and early this week before rain returns to the area, Meteorlogix said. Rain maintains high available soil moisture for wheat but also delays field work and planting, the weather firm said.

 

Looking at technical charts, wheat "still seems to be poised in an uptrend," a CBOT trader said. Short-covering and technical buying have supported the market lately.

 

Non-commercial speculative funds are net short about 47,000 contracts in CBOT wheat, according to AgResource Co. The firm said it expected additional short-covering heading into the end of the week after wheat "held up rather well" technically on Tuesday.

 

A close above US$5.30 in CBOT December wheat would produce an upside target of US$5.60 to US$5.80, AgResource said. That price seems high and "out of line with the fundamentals, but it all hinges on price direction of the financial markets," according to the firm.

 

The next downside price objective for bears is pushing and closing CBOT December wheat below solid technical support at US$4.75, a technical analyst said. He said the bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.60.

 

First resistance is seen at Tuesday's high of US$5.27 and then at last week's high of US$5.29, the analyst said. First support lies at Tuesday's low of US$5.08 and then at US$5.00, he said.