December 14, 2009

US Wheat Outlook on Monday: 1-3 cents lower on bountiful supply

Wheat futures on the Chicago Board of Trade are expected to open 1 cent to 3 cents lower Monday on abundant global stockpiles and sluggish exports.

In electronic trading, March soft red winter wheat futures were down 3 1/2 cents at US$5.34 a bushel. On the Kansas City Board of Trade, March hard red winter wheat was down 1 1/2 cents at US$5.26 a bushel.

March CBOT wheat sank 20 1/2 cents, or 3.8%, last week and may continue that trend this week as bearish fundamentals weigh on the market, analysts say. World wheat supplies are projected at the highest level in eight years, and foreign buyers can buy the grain at a lower price from suppliers other than the U.S.

"There is a huge amount of wheat out there," said Karl Seltzer, a commodity trading advisor with MaxYield Cooperative in West Bend, Iowa.

"The biggest pressure on wheat now is the stocks-to-use," Seltzer said. "Our exports have been running a little slow. There is a lot of wheat in the global market that's being offered at cheaper prices."

In a Dec. 10 report, the U.S. Department of Agriculture raised its estimate for global wheat supplies at the end of the 2009-2010 marketing year to 190.9 million tonnes from a previous estimate of 188.3 million. The estimated stocks would be the largest since 2001-02.

The U.S. will export 875 million bushels of wheat in 2009-10, down 14% from 2008-09 and the lowest since 2002-03, according to the USDA.

Given the supply and demand scenario, CBOT wheat is "probably overvalued by US$1 a bushel," Seltzer said.

Technicians say the next downside price objective for market bears is pushing and closing prices below support at the November low of US$5.07 1/2 a bushel. Bears "still have the near-term technical advantage," one technical analyst said Monday.

For market bulls, the next upside price objective is to push and close March futures prices above resistance at US$5.70 a bushel.