December 2, 2009

 

US Wheat Outlook on Wednesday: Down 1-2 cents, taking cue from overnight trade

 

 

U.S. wheat futures are poised to start weaker Wednesday after slipping overnight, with a lack of support seen from neighboring and outside markets, traders said.

 

Chicago Board of Trade March wheat is called to open 1 to 2 cents per bushel lower. In overnight electronic trading, CBOT March wheat dropped 1 cent to US$5.83.

 

Neighboring CBOT corn and soybeans fell overnight with wheat and are also expected to start lower. Outside markets like the U.S. dollar and crude oil look "stable" and may not have a strong impact on prices, a trader said.

 

Wheat is influenced by neighboring markets because funds often trade in a basket of commodities and because animal feed can be made from corn and wheat. Activity in the dollar can influence the grain markets because it can impact export demand.

 

It wouldn't be surprising to see wheat trade another two-sided session after the markets flip-flopped between positive and negative territory Tuesday, a CBOT floor trader said. Trading should remain choppy, as there are "a lot of air pockets" in the markets, he said.

 

Traders are waiting to see whether funds show up as buyers, as they have helped support recent gains. Non-commercial speculative funds are net short about 12,000 contracts in CBOT wheat, a CBOT trader estimated.

 

"Without the full force of fund buying, wheat will be hard pressed to hold onto recent gains," Benson Quinn Commodities said in a note. "However, commodities are still seen as an investment opportunity to brokerage houses and their interest is expected to be steady through the first of the year... Bearish traders won't stand in front of the market if it shows further upside momentum."

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at last week's low of US$5.52, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at the November high of US$6.04 3/4, he said.

 

First resistance is seen at US$5.90 and then at Tuesday's high of US$5.98. First support lies at Tuesday's low of US$5.80 and then at US$5.70.

 

There is a lack of fresh fundamental news out regarding wheat, traders said. World supplies remain comfortable, and export demand has been sluggish.

 

Statistics Canada is expected to raises its estimate for 2009-10 all-wheat production to 24.90 million to 25.50 million toonnes from its September estimate of 24.58 million. It is scheduled to release the revised crop estimates Thursday at 8:30 a.m. EST.

 

Traders continue to monitor a strike by Canadian National Railway engineers amid ideas it could restrict movement of Canadian wheat to export ports if the strike persists. Demand has been slow lately, and U.S. traders don't seem to be getting into "a tizzy" about the situation, a CBOT trader said.