November 30, 2009

US Wheat Outlook on Monday: 5-7 cents higher on weak dollar

Wheat futures on the Chicago Board of Trade are expected to open 5 cents to 7 cents higher Monday on speculation weakness in the U.S. dollar will boost lagging exports.

In electronic trading, December wheat was up 7 1/4 cents at US$5.56 a bushel and March futures were up 8 1/4 cents to US$5.78.

The euro gained on the dollar overnight, rising as high as US$1.5085, as concern over a potential Dubai debt default eased. A weak dollar makes U.S. grains cheaper for foreign buyers.

Wheat is "following the dollar for lack of anything else to follow," said Tomm Pfitzenmaier, who runs Summit Commodity Brokerage in Urbandale, Ia. "Theoretically, weakness in the dollar should generate more export demand."

The dollar's prolonged slump remains a bullish factor for the wheat market in an otherwise bearish picture, analysts said. U.S. wheat stockpiles at the end of the current marketing year are forecast to be the highest in a decade, while exports are projected at a seven-year low.

"It's a little hard to justify prices where they are," Pfitzenmaier said. "Long-term, you could see a 50 to 75 cent break in wheat as we go through the winter. We've got an abundance of wheat and you're going to have to reduce the price of it to get it moving.

U.S. wheat export commitments for the 2009-10 marketing year, which began June 1, totaled 14.4 million metric tonnes through the week ended Nov. 19, the U.S. Department of Agriculture said last week. That's down 29% from 20.4 million during the same period in 2008-09.

Pfitzenmaier pegged chart support for December wheat at US$5.35 to US$5.36 a bushel, near the 20-day moving average, and resistance around US$5.83 1/2, the high of the past month, reached Nov. 18.

Monday is first notice day for December contracts. A total of 4,935 contracts were posted for delivery against December CBOT wheat, above expectations for 1,500 to 3,000 contracts.