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December 2, 2008

 

US Wheat Outlook on Tuesday: Seen 3-5 cents up on stabilizing outside markets

 

 

U.S. wheat futures are poised to start firmer Tuesday in a recovery from sharp losses Monday boosted by stabilizing outside markets.

 

Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT March wheat climbed 6 cents to US$5.34.

 

Grains are expected to see some "Turnaround Tuesday" activity after being dragged lower Monday by weak outside markets, including equities and crude oil, traders said. The outside markets have "stabilized considerably" and should open the door for a bounce in wheat, a CBOT floor trader said.

 

Crude oil is linked to the grains because funds often trade in a basket of commodities and because ethanol is made from corn. Weakness in the U.S. dollar is seen as supportive to the grains because it gives foreign countries more buying power to import U.S. commodities.

 

"I think the main thing is still the outsides," said Vic Lespinasse, analyst for grainanalyst.com.

 

Traders are waiting to see the results of a tender from Egypt's state-owned General Authority for Supply Commodities. GASC issued a snap tender after the close of Monday's trading session.

 

A purchase of U.S. wheat by GASC would give wheat some additional strength at the opening, a trader said. GASC is a major buyer on the world wheat market and is known for being price sensitive.

 

Japan, meanwhile, is seeking 72,000 tonnes of wheat, including 51,000 tonnes from the U.S., in a routine tender to be concluded Thursday. The shipment is expected to arrive Jan. 16 to Feb. 15.

 

In other news, concerns persist about the potential for quality downgrades to Australia's wheat crop because of rains at harvest time. Cutting in eastern Australia continues to be disrupted by rainfall, causing milling wheat prices to firm, according to GrainCorp Ltd. (GNC.AU).

 

In the U.S., chilly weather on the Plains does not look to be cold enough to harm wheat, but episodes of strong winds may need to be watched, private weather firm DTN Meteorlogix said. Wheat in the Midwest will likely benefit from precipitation that fell during the weekend, although development will slow due to colder temperatures, the firm said in a forecast.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at the contract low of US$5.15 1/4, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.65 1/4, he said.

 

First resistance is seen at US$5.40 and then at US$5.50. First support lies at Monday's low of US$5.22 and then at US$5.15 1/4.
    

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