December 11, 2009

 

US Wheat Outlook on Friday: Seen Up 3-5 cents on techncial buying

 

 

U.S. wheat futures are poised to open higher Friday on technical buying after gains overnight, although fundamentals remain weak, traders said.

 

Chicago Board of Trade March wheat is called to open 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 4 3/4 cents to US$5.41 3/4.

 

Follow-through buying should support wheat amid some ideas the markets are in a technically oversold condition after recent losses, an analyst said. CBOT wheat on Thursday finished higher for the first time this month, while Kansas City Board of Trade and Minneapolis Grain Exchange wheat extended losses. All three markets were firmer overnight.

 

Expected gains in neighboring CBOT corn and soybeans could lend some spillover support to wheat, a trader said. The markets are linked because funds often trade in a basket of commodities, and corn and wheat are both used for animal feed.

 

The fundamental supply and demand story for wheat remains unsupportive, as the U.S. Department of Agriculture on Thursday raised its forecasts for U.S. and world ending stocks from last month. Many traders expect the government will have to lower its U.S. export estimate in the coming months due to the slow pace of export business.

 

The U.S. is facing tough competition for export sales on the world market because there is a lot of wheat to go around in the world. Foreign countries have shown that they are not in a rush to buy.

 

The USDA will issue its next supply and demand estimates in January, along with its first estimates on U.S. winter wheat plantings. Acres are thought to be down from last year due to weaker prices and planting delays in the Midwest and South.

 

Snow will provide a protective cover against the subzero cold of the past two mornings for newly planted hard red winter wheat in the north and central areas of the central and southern Plains, according to private weather firm DTN Meteorlogix. Wheat that is exposed to the cold can be damaged.

 

"Snow cover at this time of the year is precisely what the wheat grower wants," said Dennis Gartman, publisher of Gartman letter. "Snow acts both as a blanket to the wintering wheat crop and supplies moisture to the crop."

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at the November low of US$5.07 1/2, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.70, he said.

 

First resistance is seen at Thursday's high of US$5.44 and then at US$5.52, the technical analyst said. First support lies at Thursday's low of US$5.30 and then at US$5.25, he said.