December 10, 2008
US Wheat Outlook on Wednesday: Seen higher, following other markets
U.S. wheat futures are poised to start Wednesday's day session higher on spillover support from other markets, with traders looking ahead to a government crop report.
Chicago Board of Trade March wheat is called to open 3 cents to 7 cents higher. In overnight electronic trading, CBOT March wheat was up 6 1/4 cents to US$4.95 3/4.
Strength in neighboring and outside markets should pull wheat higher, traders said. The grains have been looking to crude oil and equities for direction amid jitters about the economic slowdown.
Wheat ended mostly lower Tuesday on pressure from weak outside markets, although wheat's losses were light. Bulls scored "kind of a victory" Tuesday by holding the market mostly steady after a rally Monday, said Larry Glenn, broker and analyst for Frontier Ag.
"We've got the outside markets definitely supporting us here this morning," Glenn said. "I expect to see stronger prices. It looks like (wheat) is going to be a follower of the corn and beans but not as much strength with it."
Wheat still has room to recover after falling hard last week, traders said. There is a lack of fresh fundamental news, they said.
Weakness in the U.S. dollar is a supportive factor, a trader said. A soft dollar gives foreign countries more buying power to import U.S. grains.
"I don't see a lot of demand news," Glenn said. "I don't know that we need a bunch of demand news because we're way oversold."
Ukraine's grain export in December is likely to fall 17% compared with November because of falling prices on the world grain market, according to national grain producers' association UZA. Exports are projected at 1.5 million metric tonnes, down from 2.8 million tonnes in September, 2.2 million tonnes in October and 1.8 million tonnes in November, UZA said.
There could be some positioning ahead of a U.S. Department of Agriculture supply and demand report due out at 8:30 a.m. EST Thursday, although traders don't expect to see a major change in the U.S. wheat carryout estimate, an analyst said. Trading could turn two-sided going into the report, Country Hedging said in a note.
The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at last week's contract low of US$4.71, a 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 Tuesday's low of US$4.86 1/4 and then at this week's low of US$4.78 3/4.