October 22, 2009

 

US Wheat Outlook on Thursday: Seen starting lower in setback

 

 

U.S. wheat futures are called to start lower Thursday in a setback from gains Wednesday but traders will be keeping an eye on outside markets and futures could find support from technical buying, traders said.

 

Chicago Board of Trade December wheat is expected to start 2 to 5 cents per bushel lower. In overnight electronic trading, CBOT December wheat stumbled 3 1/2 cents to US$5.39.

 

Profit-taking could weigh on prices after wheat climbed Wednesday on fund buying, a weak U.S. dollar and strength in other markets, analysts said. Outside markets do not look supportive Thursday, as the dollar is higher and crude oil is retreating, they said.

 

"I think it has become very clear recently that the grains are trading the U.S. dollar as the primary source for price direction," said Brian Hoops, president of Midwest Market Solutions. "A higher dollar will cause an immediate rebalancing of fund portfolios and send grain, livestock, energy, softs and currency prices lower."

 

Bulls have upside near-term technical momentum in CBOT wheat and gained more momentum Wednesday to suggest that prices can continue to trend higher, a technical analyst said. CBOT December wheat Wednesday closed above its 100-day moving average.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.95 1/2, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at the August high of US$5.85, he said.

 

First resistance is seen at Wednesday's high of US$5.48 1/2 and then at US$5.60. First support lies at US$5.29 and then at US$5.25.

 

Wheat's fundamentals do not support higher prices because world supplies are large, an analyst said. The markets are more concerned about money flows than fundamentals, he said.

 

Still, wet weather in the U.S. Midwest looks supportive for the grains and soybeans, as it slows the corn and soy harvests and planting of soft red winter wheat, a trader said. Wheat could feel spillover strength from CBOT corn and soy if the row crops rally, he said.

 

In other news, total weekly U.S. wheat export sales of 685,100 tonnes were seen as solid. Analysts had expected sales of 400,000 tonnes to 600,000 tonnes.

 

Net sales of 627,600 tonnes for delivery in 2009-10 were up 31% from the previous week and 10% from the prior four-week average, according to the USDA. A previously announced sale of 200,000 tonnes to Iraq was included in the total.

 

The Grain Board of Iraq issued another tender this week to buy at least 100,000 tonnes of hard wheat from any origin, the board said in a statement. Japan, meanwhile, said it purchased 133,000 tonnes of wheat, including 91,000 tonnes from the U.S., in a routine tender.