October 23, 2009

 

US Wheat Outlook on Friday: Markets expected to rise on money flows

 

 

Short-covering and money flowing into the grains are expected to push U.S. wheat futures solidly higher at the start of Friday's day session, traders said.

 

Chicago Board of Trade December wheat is called to open 10 to 12 cents per bushel higher. In overnight electronic trading, CBOT December wheat jumped 12 cents to US$5.63 3/4.

 

Wheat is poised for a firm opening after ending firmer Thursday and climbing overnight. The markets are not trading fundamentals, so traders are waiting to see "what the money flows want to do," a CBOT floor trader said.

 

Non-commercial speculative funds are probably net short about 29,000 contracts in CBOT wheat, a CBOT trader said. That reflects short-covering in the market, he said, as a Commodity Futures Trading Commission supplemental report said they were net short 47,603 contracts as of Oct. 13.

 

CBOT December wheat finished the overnight session at a premium to KCBT December wheat due to short-covering and fund money that has entered the Chicago market, a trader said. KCBT December wheat ended the overnight session up 9 cents at US$5.62.

 

KCBT hard red winter wheat futures, used to make bread, generally hold a premium over CBOT soft red winter wheat futures, used to make pastries and snack foods. HRW wheat has a higher protein content that SRW wheat.

 

Wheat rose overnight along with neighboring CBOT corn and soybeans. Money flows are pulling prices higher, with wet weather assisting the rallies amid worries about U.S. corn and soybean harvest delays, a trader said.

 

Wetness in the Midwest and south are preventing seeding of soft red winter wheat, which is often planted after soybeans. Precipitation in the Midwest will likely slow harvest next week too, according to private weather firm DTN Meteorlogix.

 

In the Southern Hemisphere, National Australia Bank Ltd. pegged Australia's wheat crop at 23 million tonnes, up 500,000 tonnes from its September estimate. That is in line with trade expectations and the U.S. Department of Agriculture's latest estimate of 23.5 million.

 

"They're going to have an exportable surplus," a trader said about Australia. "Everybody knows it."

 

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, a technical analyst said. The 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 Thursday's high of US$5.55 3/4 and then at US$5.60. First support lies at US$5.40 and then at Thursday's low of US$5.33 1/2.

 

In other news, November options expire Friday. A CBOT trader said he was "not looking for much" excitement on expiration in wheat.