November 25, 2009

 

US Wheat Outlook on Wednesday: CBOT seen up 9-12 cents as dollar slides

 

 

Wheat futures on the Chicago Board of Trade are expected to open 9-12 cents higher Wednesday as a sagging U.S. dollar boosts commodity prices.

 

In electronic trading, December wheat was up 11 1/4 cents to US$5.44 1/4 a bushel, and March futures were up 11 3/4 cents at US$5.65 1/4.

 

The dollar sank to a 15-month low against a basket of rival currencies and neared US$1.51 against the euro, the currency's weakest point of the year.

 

A weak dollar spurs demand for U.S. commodities, making wheat, corn and other grains cheaper for foreign buyers. Dollar weakness is also considered inflationary.

 

With little news to move grain prices before the U.S. Thanksgiving holiday Thursday, traders are focusing on the dollar's weakness, said Reggie Griffith, an analyst with EHedger LLC in Chicago. CBOT wheat is also making a technical recovery from Tuesday's tumble.

 

"Wheat was overdone yesterday," Griffith said. "You had hard liquidation, and I think they pushed things a bit too far. It's going to be a very thin trade [Wednesday], and I think the dollar is going to dominate action."

 

On Tuesday, December CBOT wheat plunged 24 1/4 cents, or 4.4%, to US$5.33 a bushel, the lowest closing price in almost two weeks.

 

Abundant global wheat supplies and sluggish exports suggest that U.S. wheat is overpriced, many traders and analysts say.

 

U.S. wheat stockpiles are on track to be the highest in a decade while exports are projected to decline to a seven-year low, according to the U.S. Department of Agriculture.

 

On a technical basis, wheat bulls' next upside objective is to push and close March CBOT futures prices above resistance at last week's high of US$6.04 3/4 a bushel, according to an analyst.

 

Before that level, resistance is seen at US$5.60 and US$5.70, while support lies at Tuesday's low of US$5.52 and US$5.40.