December 5, 2008
US Wheat Outlook on Friday: Seen down 2-4 cents on technical selling, outsides
Technical selling and weak outside markets are expected to knock U.S. wheat futures lower at the start of Friday's day session.
Chicago Board of Trade March wheat is called to open 2 cents to 4 cents per bushel lower. In overnight electronic trading, CBOT March wheat fell 1 3/4 cents to US$4.84 1/4.
Expected declines in equities and crude oil are expected to weigh on the grain markets after the Bureau of Labor Statistics said U.S. nonfarm payrolls fell 533,000, the largest decline since December 1974, and the unemployment rate came in at 6.7%, the highest since October 1993, traders said. Grains have been looking to the outside energy and equity markets for direction amid worries about the economic slump.
Strength in the U.S. dollar is another bearish influence on grains, as it gives foreign countries less buying power to import U.S. commodities, a trader said. On the other hand, a sharp drop in U.S. wheat futures on Thursday could help U.S. wheat look more attractive to importers, he said.
CBOT March wheat Thursday sank to a fresh contract low, below technical support, at US$5. The selloff was overdone and could inspire a rebound Friday, a CBOT trader said.
Trading could turn two-sided but it will be "still in a defensive type posture," the trader said. CBOT March wheat may be making a move toward finding a home in the area around US$4.50, he said.
"Wheat bears still have the solid near-term technical advantage and gained more power Thursday," a technical analyst said. "Price action Thursday saw a bearish downside 'breakout' from a sideways trading range at lower price levels."
The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at US$4.50, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.20, he said.
First resistance is seen at US$5.00 and then at US$5.20. First support lies at Thursday's contract low of US$4.85 and then at US$4.75.
The markets continue to be dominated by the idea that there are ample supplies of wheat in the world, traders said. Global production is expected to set a new record this year due to expanded plantings and mostly favorable growing weather.
There continues to be concern about quality losses in Australia due to rain at harvest time, although the worries are not enough to spark a rally, a trader said. Harvest is estimated to be 60% complete in South Australia, with yield and grain quality ranging from crops struggling to return seed to near-average yields, according to a monthly crop report from the state's Department of Primary Industries and Resources.
Export demand hasn't been strong enough lately to overcome bearishness in the market, traders said. Business is being done, but it is mostly routine, they said.
Pakistan has floated a tender to import 500,000 metric tonnes of wheat to stabilize local prices and meet a domestic shortfall, an executive at state-run Trading Corporation of Pakistan said. Foreign suppliers have until Dec. 20 to file bids.
Japan bought 72,000 metric tonnes of wheat, including 51,000 tonnes U.S. wheat and 21,000 tonnes Canadian wheat, in a weekly tender. The grain is expected to arrive between Jan. 16 and Feb. 15.