November 17, 2009

 

US Wheat Outlook on Tuesday: Lower on profit-taking, outside pressure

 

 

Profit-taking and pressure from outside markets are expected to weigh on U.S. wheat futures early Tuesday as prices retreat from a rally Monday.

 

Chicago Board of Trade December wheat is called to open 4 to 6 cents per bushel lower. In overnight electronic trading, CBOT December wheat fell 6 cents to US$5.56 1/4 and CBOT March wheat lost 6 cents to US$5.77 3/4.

 

Neighboring CBOT corn and soy futures are called to open lower with wheat after falling overnight. Traders are expected to book profits after prices jumped Monday, an analyst said.

 

"Today is 'Turnaround Tuesday' and we can reasonably expect to see prices trade down," said Dennis Gartman, publisher of the Gartman Letter.

 

Wheat is due for a setback after climbing Monday on weakness in the U.S. dollar and fund buying, traders said. Outside markets are setting a bearish tone Tuesday, as the dollar is firmer and crude oil and gold are falling, they said.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at US$5.48, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at the October high of US$5.93, he said.

 

First resistance is seen at Monday's high of US$5.85 1/2 and then at US$5.93, the technical analyst said. First support lies at US$5.75 and then at Monday's low of US$5.62, he said.

 

"The commodities are trading money flow and the U.S. dollar relationship rather than ending stocks, harvest progress or any other traditional fundamentals," Midwest Market Solutions said in a note. "Overnight, the U.S. dollar is rising and gold, crude oil and equity markets are all lower."

 

Fundamentals for wheat do not look supportive, traders said. World supplies are large, and export demand has been slow.

 

U.S. winter wheat planting is almost done, with 90% planted as of Sunday, up from 86% the prior week and compared with the five-year average of 95%, according to the U.S. Department of Agriculture's weekly crop progress report. The USDA said 77% of the winter wheat crop had emerged, up from 71% the prior week but below the five-year average of 87%.

 

The slow emergence means that the crop will need a favorable winter to avoid problems, an analyst said. Slow emergence limits the ability of the crop to store water and weather adverse conditions over the winter, he said.

 

Conditions in the central and southern U.S. Plains look "mostly favorable" for emerging and developing hard red winter wheat, used to make bread, according to private weather firm DTN Meteorlogix. Cool, damp conditions may slow the final planting effort somewhat, the firm said.

 

In export news, Japan said is seeking 92,000 tonnes of wheat, including 71,000 tonnes of U.S. wheat, in a routine tender to be concluded Thursday. The wheat is expected to be delivered Dec. 21 to Jan. 20.