November 6, 2008
US Wheat Outlook on Thursday: Down on outside markets, follow-through
U.S. wheat futures are poised to start Thursday's day session weaker on follow-through selling and pressure from weakness in outside markets.
Chicago Board of Trade December wheat is called to open 2 to 4 cents per bushel lower. In overnight electronic trading, CBOT December wheat ended down 1 1/4 cents at US$5.36.
Weakness in crude oil and strength in the U.S. dollar should weigh on the grains, traders said. A stronger dollar gives foreign countries less buying power to import U.S. commodities.
Crude oil is linked to the grains because funds often trade in a basket of commodities. Corn, which helps provide direction for wheat, also is used to make ethanol.
"Price action will continue to follow the outside markets," Country Hedging said in a wheat comment.
CBOT December wheat on Wednesday closed near the session low amid sharp losses in crude oil and in the stock market. The bulls had gained some fresh upside technical momentum after wheat rose Monday and Tuesday, but they lost it Wednesday, a technical analyst said.
The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at the October low of US$4.96 1/2, the technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at this week's high of US$5.87 3/4, he said.
First resistance is seen at US$5.50 and then at US$5.65. First support lies at Wednesday's low of US$5.33 1/4 and then at US$5.25.
"The wheat bears have the overall near-term technical advantage and regained downside momentum Wednesday," the analyst said.
Forecasts for increasing world production and ending stocks remain fundamentally bearish for wheat, an analyst said. The world in 2008-09 is expected to produce a record crop due to expanded plantings and mostly favorable weather.
Ukraine, known as an aggressive wheat exporter on the world market, raised its grain harvest forecast to 51 million tonnes in clean weight, up from its previous estimate of 49.1 million and from 29.3 million tonnes in 2007. Exports from Ukraine are expected to slow, as there are a limited number of grain export contracts for November and practically none for December and January, according to the agriculture ministry.
Total weekly U.S. wheat export sales were 379,300 tonnes, at the low end of trade estimates. Sales for delivery in 2008-09 were 366,300 metric tonnes, down 20% from the previous week and 18% from the prior four-week average, the U.S. Department of Agriculture said.
In other export news, Japan said, without any explanation, that it rejected all bids in a tender to buy 96,000 tonnes of U.S. wheat. This is the third week in a row that the government has rejected bids to buy U.S. wheat in a weekly tender.
The Taiwan Flour Millers Association, meanwhile, bought 52,850 tonnes of U.S. No. 1 wheat from trading house Columbia Grain in a tender concluded late Wednesday. The entire shipment will arrive in Taiwan between Dec. 12 and Dec. 26.