November 11, 2009

 

US Wheat Outlook on Wednesday: Seen up on follow-through, spillover

 

 

Follow-through buying and spillover support are expected to lift U.S. wheat futures at the start of Wednesday's day session, despite large world supplies.

 

Chicago Board of Trade December wheat is called to open 5 cents to 7 cents per bushel higher. In overnight electronic trading, CBOT December wheat jumped 6 1/4 cents to US$5.29 1/4.

 

Wheat ended mostly higher Tuesday on fund buying and borrowed strength from CBOT corn, traders said. Corn was higher with wheat overnight, and the markets will wait to see whether commodity funds return as buyers, traders said.

 

Weakness in the U.S. dollar and gains in crude oil and precious metals look supportive for the grains Wednesday, a CBOT floor analyst said. A soft dollar is sometimes said to be supportive because it makes U.S. grain more attractive to foreign buyers.

 

Fundamentals look unfriendly for wheat, as world ending stocks are large and demand for U.S. wheat is lackluster, analysts said. The U.S. Department of Agriculture on Tuesday raised its projections for U.S. and global carryout and cut its forecast for U.S. exports.

 

Japan said is seeking 97,000 tonnes of wheat, including 76,000 tonnes from the U.S., in a routine tender to be concluded Friday. Otherwise, the export front was quiet, traders said.

 

"Dollar weakness and fund investment are being pointed to as the sources of wheat's recent rally in the face of growingly bearish fundamentals," Country Hedging said in a note. "The USDA again confirmed that both domestic and global stocks of wheat are at historically high levels yesterday."

 

Country Hedging called wheat to open higher, "as the market continues to disregard stocks situation." The USDA pegged global carryout at an eight-year high of 188.3 million tonnes.

 

Bulls have the slight near-term technical advantage after recent choppy trading, a technical analyst said. The lead contracts at all three U.S. wheat exchanges have several highs at current levels during the past two weeks, according to Benson Quinn Commodities.

 

"Trade above those highs would probably bring more money into the market while fundamentals continue to point lower," Benson Quinn said.

 

The next downside price objective for bears is pushing and closing CBOT December wheat below solid technical support at last week's low of US$4.87 3/4, the technical analyst said. 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 last week's high of US$5.28 1/4 and then at US$5.40, the technical analyst said. First support lies at US$5.15 and then at Tuesday's low of US$5.07 3/4, he said.