November 5, 2009

 

US Wheat Outlook on Thursday: Seen down 2-4 cents, waiting for Egypt, funds

 

 

U.S. wheat futures are poised to start weaker Thursday on follow-through selling from the overnight session, as traders wait to see the results of an Egyptian tender and the influence of fund money.

 

Chicago Board of Trade December wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT December wheat fell 3 cents to US$5.18.

 

Wheat pulled back overnight after closing solidly higher Wednesday. The markets lack fundamental support and are trading money flows, a CBOT floor trader said.

 

Sharp recent moves in the markets are "chopping people up" as prices can quickly rise or fall several cents, the trader said. The feeling is that the markets will close higher if the funds show up as buyers and lower if they don't, he said.

 

It looks as though the whole CBOT grain floor is set to open steady to lower after soybeans fell overnight and nearby corn ended unchanged, a trader said. Outside markets are not providing a strong direction, he said.

 

Drier, warmer weather in the central U.S. looks favorable for the corn and soy harvests, which have been delayed by wetness, traders said. The harvests and soft red winter wheat planting should benefit for at least the next five to seven days, according to private weather firm DTN Meteorlogix.

 

Traders are watching for the results of a tender from Egypt's General Authority for Supply Commodities. U.S. wheat is "not competitive at all" because it is priced too high, a U.S. trader said.

 

Egypt is a major wheat buyer on the world market and known for being price conscious. GASC, which issued its usual tender to buy 55,000 to 60,000 tonnes of wheat on a free on board basis, often buys more than that amount.

 

Weekly U.S. wheat export sales were not impressive, traders say. The U.S. Department of agriculture said net sales of 284,500 tonnes were down 18% from the previous week and 49% from the prior four-week average. Analysts had expected sales of 300,000 tonnes to 500,000 tonnes.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.80, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.40, he said.

 

First resistance is seen at Wednesday's high of US$5.28 1/4 and then at US$5.40, the analyst said. First support lies at Wednesday's low of US$5.05 and then at US$5.00, he said.