November 20, 2009

 

US Wheat Outlook on Friday: Weaker on outside markets, profit-taking

 

 

U.S. wheat futures are poised to start weaker Friday on pressure from outside markets, profit-taking and a lack of fundamental support, traders said.

 

Chicago Board of Trade December wheat is called to open 4 cents to 6 cents per bushel lower. In overnight electronic trading, CBOT December wheat fell 5 1/2 cents to US$5.57, and March wheat dropped 6 cents to US$5.78.

 

Strength in the U.S. dollar and weaker CBOT corn and crude oil prices should set a negative tone for wheat, traders said. Wheat may extend losses from Wednesday and Thursday as the markets continue to pull back from recent rallies, an analyst said.

 

Wheat does not have a supportive fundamental storyline but found strength recently from investment-fund buying, traders said. World supplies are considered large, and export demand for U.S. wheat has been weak.

 

Marketing-advisory service Profarmer Australia on Thursday cut its production forecast for the country's 2009-10 wheat crop to 20.9 million metric tonnes from 21.9 million tonnes three weeks ago. Commonwealth Bank of Australia cut its wheat production forecast to 21.6 million tonnes, down 700,000 tonnes from its previous estimate "as a result of frosts, dryness and heat during the critical spring flowering and filling period," it said in a note.

 

The reduced production estimates don't create too many waves in the wheat market because global supplies are comfortable, an analyst said. There is still plenty of wheat to go around, he said.

 

The weakness in outside markets should prompt profit-taking ahead of the weekend, an analyst said. As of Thursday's close, CBOT December wheat was up 23 1/2 cents on the week.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at US$5.40, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at this week's high of US$6.04 3/4, he said.

 

First resistance is seen at US$5.93 and then at US$6.00. First support lies at US$5.77 and then at Thursday's low of US$5.67 1/2.

 

In other news, December options expire Friday.