November 24, 2008
US Wheat Outlook on Monday: Seen up on outside markets, weak dollar
U.S. wheat futures are poised to follow outside markets higher Monday amid ideas that a recent price break could attract export business.
Chicago Board of Trade March wheat is called to open 8 to 10 cents per bushel higher. In overnight electronic trading, CBOT March wheat jumped 10 1/4 cents to US$5.28 1/4.
Stronger U.S. equities and crude oil should help pull wheat higher as the grains continue to look to outside markets for direction, a trader said. News that the federal government will rescue Citigroup Inc. (C) boosted equities and energy prices.
Weakness in the U.S. dollar adds support to wheat as it gives foreign countries more buying power to import commodities, a trader said. There is some supportive chatter that lower wheat prices could spark export demand, analysts said.
"All three markets made new near term lows last week," Country Hedging said, referring to the CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange. "With the weaker dollar we could generate export demand."
Egypt, which bought 30,000 tonnes of Russian wheat in a tender last week, is expected to tender again soon, according to Citigroup. Egypt is a major buyer on the world wheat market and is known for being price sensitive.
Egypt will impose new specifications for the import of wheat in order to guarantee better quality, according to a state-owned Egyptian newspaper. The government's main wheat importer, the General Authority for Supply Commodities, last week said that all Ukrainian wheat imports meet its specifications. Several Egyptian newspapers have reported that GASC had imported Ukraine feed wheat, which isn't suitable for human use.
Wheat is technically in an oversold condition and "a near term recovery is possible," Country Hedging said in a market comment. CBOT March wheat last week closed down 56 1/2 cents on the week before bouncing overnight.
"March Chicago wheat prices Friday closed lower, near the session low, at a bearish weekly low close and also hit a fresh contract low," a technical analyst said.
The next downside price objective for the bears is pushing and closing CBOT March wheat below major psychological support at US$5.00, the analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at the recent high of US$5.87, he said.
First resistance is seen at Friday's high of US$5.33 1/4 and then at US$5.50. First support lies at Friday's contract low of US$5.15 1/4 and then at US$5.00.
In other news, precipitation in the eastern and southern U.S. Midwest Monday favors soft red winter wheat development, private weather firm DTN Meteorlogix said in a forecast. Soil moisture and temperatures favor pre-winter growth of hard red winter wheat in the Plains, except that it may be too dry through southeast areas, the forecast said.
In Australia, the eastern crop belt could see rains later this week. Wetness will slow down the already delayed wheat harvest and increase the risk for quality losses, Meteorlogix said.