October 29, 2009

 

US Wheat Outlook on Thursday: Weaker dollar could lift prices early

 

 

Supportive signals from outside markets should help lift U.S. wheat futures early Thursday, although disappointing export demand and recent technical damage could limit gains, analysts said.

 

Chicago Board of Trade December wheat is called to open 1 cent to 3 cents per bushel higher. In overnight electronic trading, CBOT December wheat rose 2 3/4 cents to US$4.97 1/2.

 

Weakness in the U.S. dollar and strength in crude oil should set a supportive tone for the grains and soybeans, traders and analysts said. Wheat is expected to rise along with neighboring CBOT corn and soybeans.

 

"They were due for a little higher trade, mainly due to the crude oil," said Rich Nelson, director of research at Allendale.

 

The weather next week looks warmer and drier in the central U.S., which should help advance the corn and soybean harvest, analysts said. That should also allow producers to make progress planting soft red winter wheat, which is often seeded behind soybeans, they said.

 

Gains in wheat would be a turnaround from losses Wednesday, when CBOT December wheat hit a fresh three-week low. Key outside markets were "fully bearish for wheat Wednesday," as the U.S. dollar was firmer, crude oil prices were lower and the stock indexes were lower, a technical analyst said.

 

Wheat has been pulled back recently after prices climbed to their highest level since early August on speculative buying and short-covering. Funds were noted as sellers Wednesday, and traders will watch the money flows Thursday, an analyst said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.80, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.29, he said. First resistance is seen at US$5.00 and then at Wednesday's high of US$5.08 3/4, the technical analyst said. First support lies at Wednesday's low of US$4.91 1/4 and then at US$4.80, he said.

 

"Serious near-term chart damage has occurred this week to suggest that a near-term market top is in place and that the lows could be retested," the technical analyst said. "The bears have the near-term technical advantage." US$5.29, he said.

 

Weekly U.S. wheat export sales of 347,700 tonnes for delivery in 2009-10 were not impressive and came in below trade expectations, analysts said. The sales were down 45% from the previous week and 42% from the prior four-week average, according to the U.S. Department of Agriculture.

 

"Export sales actually were a little disappointing," Nelson said.

 

In other export news, Japan said it bought 39,407 tonnes of wheat and 20,577 tonnes of barley in a simultaneous buy-sell, or SBS, tender. Of the total purchases, 27,600 tonnes of wheat, are for bulk shipment, while the remainder is for containerized shipment, an official said. The bulk wheat shipments should be from Canada and Australia, while the containerized wheat is likely to be from Canada, Australia and the U.S., he said.