October 28, 2009

 

US Wheat Outlook on Wednesday: Down 8-10 cents amid technical pressure

 

 

U.S. wheat futures are expected to dip on Wednesday's open amid follow-through selling and a bearish technical trend.

 

Chicago Board of Trade wheat futures are called 8 to 10 cents lower. In overnight trade, CBOT December wheat was down 9 3/4 cents to US$4.93 1/2 per bushel and March wheat was down 10 cents to US$5.12.

 

The December CBOT wheat contract has plunged 83 1/2 cents since hitting an intraday high of US$5.74 3/4 on Friday. The CBOT, as well as the Kansas City and Minneapolis markets, are looking bearish technically, as Farm Futures notes in a morning commentary that all three broke below the uptrend line from the recent rally.

 

Technical analyst Jim Wyckoff said "serious near-term chart damage occurred Tuesday to suggest that a near-term market top is in place."

 

The next downside price objective for the bears is pushing and closing prices below solid technical support at US$4.80, Wyckoff said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at US$5.40 a bushel.

 

First resistance is seen at US$5.15 and then at Tuesday's high of US$5.29 1/4. First support lies at US$5.00 and then at US$4.95 1/2.

 

"There is nothing really holding the market up for wheat," said Citigroup analyst Terry Reilly, although he did note possible support at the 50-day moving average around US$3.83.

 

The market is also seen as weak fundamentally. The recent move higher was mostly fueled by short-covering and weakness in the dollar. But demand is weak and there are few supply issues, traders say.

 

They note soft red winter wheat planting in the U.S. has been sluggish, but drier weather in the nation's midsection next week is expected to boost the planting pace.

 

In international news, rainfall this week through much of Western Australia's northern and central wheatbelt will be too late in the growing season to be of much benefit to winter crops including wheat in northern growing areas, industry participants reported Wednesday.

 

Shane Sander, a risk management adviser at commodity manager AGvise, estimates wheat production in Western Australia this crop year ending March 31, 2010, will fall short of 8.0 million metric tonnes, which would be down from actual 2008-09 output of 8.9 million tonnes.

 

Also, India's federal government has allowed the sale of 500,000 metric tonnes of wheat at prices higher than current state-set buy price from farmers, a senior food ministry official said Wednesday.

 

The wheat industry had opposed the sale as the price band the government was considering was higher than market prices, fueling a rally in local spot and wheat futures.