November 16, 2009

 

US Wheat Outlook on Monday: Seen up on spillover buying, weak dollar

 

 

Support from other markets and follow-through buying are expected to boost U.S. wheat futures early Monday after gains overnight.

 

Chicago Board of Trade December wheat is called to open 5 to 8 cents per bushel higher. In overnight electronic trading, CBOT December wheat rose 7 1/2 cents to US$5.46 1/2.

 

Weakness in the U.S. dollar and gains in neighboring CBOT corn and soybeans should push wheat higher amid a lack of fundamental news, a CBOT floor analyst said. The falling dollar is seen as supportive for all the grains and soybeans, he said.

 

A soft dollar is often considered friendly because it makes U.S. grain more attractive to foreign buyers. However, the U.S. wheat market continues to struggle with lackluster demand and stiff competition from other exporters.

 

"Wheat prices are not competitive in the world at all," the CBOT floor analyst said.

 

Wheat is expected to go "along for the ride" if neighboring corn and soybeans rise, a trader said. Corn and soy were higher overnight, supported by the weak dollar, an analyst said.

 

"As long as the dollar stays weak, we'll stay higher," he said.

 

CBOT wheat has the potential to feel support from some short covering. Non-commercial speculative funds were net short 35,144 contracts as of Nov. 9, up from 33,477 contracts as of Nov. 3, according to a supplemental Commitments of Traders report from the Commodity Futures Trading Commission.

 

Gains on Monday would follow strength in wheat last week. CBOT December wheat on Friday closed up 41 3/4 cents on the week.

 

"Bulls have the near-term technical advantage," a technical analyst said. "Prices have recently resumed a six-week-old uptrend on the daily bar chart."

 

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

 

First resistance is seen at last week's high of US$5.41 3/4 and then at US$5.50. First support lies at Friday's low of US$5.27 1/2 and then at US$5.19 1/2.

 

The U.S. Department of Agriculture is slated to issue updates on U.S. winter wheat planting, emergence and conditions at 4 p.m. EST in its weekly crop progress report. Planting should be wrapping up, and the crop has "plenty of moisture," an analyst said.

 

Wheat conditions are mixed in Argentina, with crops in the central areas of the farm belt doing well, and fields in the southwest struggling due to drought, Argentina's Agriculture Ministry said in its weekly crop report Friday. As of Wednesday, farmers had harvested 8.6% of the planted area, according to the exchange.

 

Southern wheat areas of La Pampa and southwest Buenos Aires could use more rain, but only light showers are expected from time to time, private weather firm DTN Meteorlogix said in a forecast.