December 16, 2009

 

US Wheat Outlook on Wednesday: Seen steady-up, following overnight gains

 

 

U.S. wheat futures are expected to start steady to higher Wednesday after finishing the overnight session slightly firmer, although traders do not expect the U.S. to win business from Egypt.

 

In overnight electronic trading, Chicago Board of Trade March wheat rose 1 1/4 cents to US$5.38 per bushel.

 

Follow-through buying from the overnight session should help lift wheat, even though wheat's fundamentals are not supportive, a trader said. Prices are being driven by speculative money flows into the markets, he said.

 

Volume in wheat should be low, with the markets seen to be heading into sluggish "holiday mode," a CBOT trader said. CBOT March wheat is near the lower end of its range, with US$5.28-US$5.30 seen as a "catch area," he said.

 

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 this week's high of US$5.48 and then at US$5.52, the technical analyst said. First support lies at last week's low of US$5.30 and then at US$5.25, he said.

 

Weakness in the U.S. dollar looks supportive for the grains as it is "stimulating traders' appetite for risk," an analyst said. Neighboring CBOT corn and soybeans are also expected to start higher.

 

Wheat is the "weak sister" of the markets because its supply and demand storyline is bearish, a trader said. World wheat supplies are considered ample, while export demand for U.S. wheat has been sluggish due to competition from other countries.

 

Egypt's state-owned General Authority for Supply Commodities said Tuesday it was tendering to buy up to 120,000 tonnes of wheat. The U.S. is not expected to win any of the business because its prices are too high. Egypt is a major buyer on the world market and known for being price sensitive.

 

In other news, Agriculture and Agri-Food Canada's market analysis division raised its forecasts for Canadian wheat production, exports and ending stocks from its October estimates. It pegged exports at 18 million tonnes, compared with its October estimate of 16.9 million and with the U.S. Department of Agriculture's estimate of 18.5 million. The increased estimates reaffirm that there is "plenty of wheat around," a CBOT trader said.

 

Recent warm weather through the Ukraine and south Russia has melted snow cover, which means wheat may be more susceptible to winter-kill in the event of a sudden turn to much colder temperatures, according to private weather firm DTN Meteorlogix. Forecasts call for "some chance of snow, which should provide a protective cover in the event of further cold weather threats," the firm said.