November 4, 2008
US Wheat Outlook on Tuesday: 2-4 cents up on technical buys, spillover
Technical buying and spillover support from other markets are expected to lift U.S. wheat futures higher at the start of Tuesday's day session.
Chicago Board of Trade December wheat is called to open 2 to 4 cents per bushel higher. In overnight electronic trading, CBOT December wheat jumped 2 1/2 cents to US$5.64 1/2.
It remains supportive for wheat that speculative funds hold a net short position at the CBOT, a trader said. Funds are net short about 35,000 contracts in CBOT wheat, he said.
Short-covering helped push wheat higher Monday, following a sharp sell-off in October. Wheat's sell-off in October was "more over extended than that of corn and soybean futures," research marketing firm Allendale said in a market comment.
Strength in CBOT corn and soybeans and in outside markets on Tuesday should help boost wheat, traders said. Weakness in the U.S. dollar also is supportive, as it gives foreign countries more buying power, they said.
"If corn and beans want to run, wheat won't sit still," a CBOT floor trader said.
The technical trend in wheat is turning sideways after CBOT December wheat on Monday closed above downtrend resistance and a short term moving average level of US$5.33 and then US$5.49, Allendale said. A surge Tuesday above last week's high of US$5.78 1/2 could accelerate gains, a CBOT trader said.
"A slight uptrend is in the making," Allendale said.
The next downside price objective for the bears is pushing and closing CBOT December wheat below major psychological support at US$5.00, a technical analyst said. Bulls' next upside price objective is to push and close the contract above psychological resistance at US$6.00, he said.
First resistance is seen at Monday's high of US$5.75 and then at last week's high of US$5.78 1/2. First support lies at US$5.50 and then at Monday's low of US$5.32 3/4.
There isn't much fresh fundamental news out for the markets. Japan said it's seeking 96,000 tonnes of U.S. wheat, including 62,000 tonnes of dark northern spring wheat and 34,000 tonnes of western white wheat, in a routine tender to be concluded Thursday.
The U.S. Department of Agriculture said 67% of the U.S. winter wheat crop was rated good to excellent, up from 55% last year. In Kansas, the top hard red winter wheat-producing state, 73% of the crop was rated good to excellent. The USDA said 76% of the U.S. winter wheat crop had emerged, up from 69% last week and just shy of the 78% average. Winter wheat plantings were 90% complete, up from 84% last week but down from the average of 92%.
The U.S. central and southern Plains have "mainly favorable conditions" for the final planting effort and for early growth of wheat, DTN Meteorlogix said. Rainfall during the next six to 10 days, if it occurs, could continue to favor pre-winter growth, the private weather firm said.
There are favorable conditions for wheat in Australia's New South Wales and in West Australia, although it's still too dry through South Australia and western Victoria, Meteorlogix said. Advance Trading Australia Pty has pegged the crop Down Under at around 21 million metric tonnes, below the USDA's October estimate of 21.5 million tonnes.