November 9, 2009

 

US Wheat Outlook on Monday: Seen stronger on outside support, bounce

 

 

U.S. wheat futures are poised to start stronger Monday on support from outside markets and in a bounce from Friday's sell-off.

 

Chicago Board of Trade December wheat is called to open 6 to 9 cents per bushel higher. In overnight electronic trading, CBOT December wheat jumped 8 1/4 cents to US$5.05 1/2.

 

The sinking U.S. dollar and climbing crude oil, gold and silver are setting a bullish tone for the grains, traders said. Neighboring CBOT corn and soybeans also were stronger overnight, and the markets may "feed off" one another, a CBOT floor trader said.

 

Traders are waiting to see U.S. Department of Agriculture crop production and supply/demand reports due out at 8:30 a.m. EST Tuesday. The data isn't expected to change the fundamental outlook for the wheat markets but will likely reconfirm that world supplies are large, traders said.

 

The average of 16 analysts' estimates for 2009-10 U.S. wheat carryout is 869 million bushels, up slightly from USDA's October estimate of 864 million, according to a Dow Jones Newswires survey. Of those polled, five said they expected USDA to leave its estimate unchanged, while five predicted an increase and six predicted a decrease.

 

The reports will be more important for corn and soybeans, as traders wait to see updated estimates on U.S. production and yield. Harvest has been delayed this season due to wet weather, but conditions look mostly favorable this week, traders said.

 

Wheat will continue to keep an eye on the neighboring markets for direction, an analyst said. Soybeans and soymeal remain the leader to the upside going into the reports, and "if they can't go higher, then the corn and wheat have little chance," according to a note from Global Commodity Analytics & Consulting.

 

A good portion of the activity in CBOT wheat on Monday could be spread-related, as it is the second day of the Goldman roll, a trader said. Contracts are rolling to the March month from December, he said.

 

The markets fell Friday, and there are some ideas the losses were overdone, a trader said. The next downside price objective for bears is pushing and closing CBOT December wheat below solid technical support at US$4.80, a 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 US$5.10, the technical analyst said. First support lies at Friday's low of US$4.96 1/2 and then at US$4.88, he said.