November 12, 2009

 

US Wheat Outlook on Tuesday: Down on profit-taking, waiting for Egypt

 

 

Profit-taking and bearish signals from outside markets are expected to drag down U.S. wheat futures at the start of Thursday's day session, with traders not expecting Egypt to book U.S. wheat in a tender.

 

Chicago Board of Trade December wheat is called to open 4 to 8 cents per bushel lower. In overnight electronic trading, CBOT December wheat fell 7 1/4 cents to US$5.24 1/2.

 

Wheat is due for a setback after climbing recently on fund buying and spillover support from other markets, a trader said. Strength in the U.S. dollar and weakness in crude oil, corn and soybeans set a negative tone for the grains, he said. Fundamentals for wheat remain unsupportive, as world supplies are hefty and demand for U.S. wheat is unimpressive.

 

"The wheat market continues to take its cues from outside markets and the choppy counter intuitive trading has pushed traditional market participants to the sideline," Country Hedging said in a note.

 

Traders are waiting to see the results of a tender from Egypt's state-owned General Authority for Supply Commodities, issued Wednesday after the close of trading. Egypt, known for being price sensitive, is a major buyer on the world wheat market.

 

Egypt is expected to buy Black Sea or possibly French wheat in its tender, as U.S. wheat is "too expensive" after recent gains, a trader said. Weekly U.S. export sales data are set to be released Friday, one day later than normal due to the Veterans Day holiday Wednesday.

 

"Exports remain sluggish amid mostly routine sales and strong competition out of the Black Sea.," said Bryce Knorr, analyst for Farm Futures. "U.S. wheat gets its next test this morning, when Egypt announces results of its latest snap tender."

 

CBOT December wheat closed higher Wednesday and hit a fresh 2 1/2-week high. Bulls have the near-term technical advantage and gained some fresh upside momentum, a technical analyst said.

 

The next downside price objective for bears is pushing and closing CBOT December wheat below solid technical support at this week's low of US$4.96 3/4, the analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.50, he said.

 

First resistance is seen at Wednesday's high of US$5.40 and then at US$5.50, the analyst said. First support lies at US$5.25 and then at Wednesday's low of US$5.19 1/2, he said.

 

In other news, French analytical firm Strategie Grains projected 2010 soft wheat plantings will be up 1% on the year to 22.86 million hectares. Plantings of soft red winter wheat in the U.S. are expected to drop from last year due to seeding delays and weak prices.