December 15, 2008
US Wheat Outlook on Monday: 8-10 cents up on support from other markets
Spillover support from other markets and follow-through buying should pull U.S. wheat futures higher at the start of Monday's day session, traders said.
Chicago Board of Trade March wheat is called to open 8 cents to 10 cents per bushel higher. In overnight electronic trading, CBOT March wheat jumped 11 3/4 cents to US$5.24 3/4.
Expected gains in CBOT corn and soybeans are supportive to wheat, which is seen as "more of a follower" than a leader, a floor trader said. A rally in CBOT corn on Friday pushed wheat higher.
"We'll definitely need some help from the rest of the floor" to sustain a rally in wheat, a CBOT trader said.
Weakness in the U.S. dollar and gains in crude oil should add support to the grains, traders said. A weak dollar makes U.S. grains more attractive to foreign buyers. Crude oil is linked to grains because funds often trade in a basket of commodities and because ethanol is made from corn.
CBOT March wheat could find some technical support if it moves above the area around US$5.30, a trader said. Last week's high in open outcry trading was US$5.31.
CBOT wheat Friday "closed at a bullish weekly high close," a technical analyst said. "However, prices are still trapped below a nine-month-old downtrend on the daily bar chart," he said.
The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at the contract low of US$4.71, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.50, he said.
First resistance is seen at US$5.25 and then at Friday's high of US$5.32 1/2. First support lies at US$5.00 and then at Friday's low of US$4.89.
Traders will keep an eye on frigid weather whipping through the U.S. Plains amid concerns about the potential for winterkill. Winterkill can harm wheat if temperatures drop and there is not enough snow cover on the ground.
Lows on Monday were below -10 degrees Fahrenheit in northeast Colorado, western Nebraska and northwest Kansas, with "limited" snow cover in the area, according to private weather firm DTN Meteorlogix. Still, the markets won't get too concerned about the cold because favorable spring weather could result in a bumper crop, a trader said.
"You'll go broke trying to trade winterkill," he said.
In Australia, rain across southern South Australia, Victoria and New South Wales late last week and during the weekend was "unfavorable for any mature wheat still in the fields," Meteorlogix said. Wet weather at harvest time has disrupted wheat cutting and lowered the quality of the crop.
In other news, India's wheat production may rise to a record high of 80 million metric tonnes in 2009 due to favorable weather, high yields, attractive prices and steady acreage, a senior agriculture scientist and lawmaker said. Farmers are planting more wheat in anticipation of an increase in the government-set intervention price for 2009, said M.S. Swaminathan.