December 17, 2008
US Wheat Outlook on Wednesday: Continued short-covering rally expected
A continued rally in U.S. wheat futures is expected Wednesday, driven by short-covering and a stronger export outlook on weakness in the U.S. dollar.
Chicago Board of Trade March wheat is called to open 7 to 10 cents per bushel higher. In overnight electronic trading, CBOT March wheat added 9 cents to US$5.53, breaking through the solid US$5.50 resistance level.
"Funds are still short in Chicago," a CBOT floor broker said, estimating speculative players still held about 24,000 short positions.
"With the destruction of the market, a lot of people were caught short," he said.
Crude oil is "demonstrating no real direction" ahead of a decision expected Wednesday on production cuts by the Organization of Petroleum Exporting Countries, he added.
CBOT March wheat gained in Tuesday's trading session and closed near the day's high, but bears maintain "the overall near-term technical advantage," a market technician said, noting "prices are still in a nine-month-old downtrend on the daily bar chart."
The next objective for the bears is to push and close below major psychological support at US$5, " he said, marking first support at US$5.35, then US$5.25.
As wheat bulls gun to pierce solid technical resistance at US$5.78, first resistance lies at Tuesday's high of US$5.52, the technician said.
The southern plains are experiencing "mostly favorable crop conditions," but dry conditions across West Texas are causing slow growth concerns, "with major concerns through central Texas," DTN Meteorlogix said.
Mostly dry conditions are speeding the harvest of Argentina's drought-stressed crop, the private weather forecasting firm said.
But "wet conditions across Australia wheat areas [are] unfavorable for maturing wheat and will likely delay the wheat harvest," Meteorlogix said.
In global trading news, the Taiwan Flour Millers Association bought 56,030 metric tonnes of U.S. No.1 wheat from trading house Toepfer, an association official said Wednesday.
Farm Futures Senior Editor Bryce Knorr noted that on Wednesday Jordan filled all its 18.4 million bushel tender with Russian wheat, as buyers remain price sensitive.
Also, Japan's Ministry of Agriculture, Forestry and Fisheries is seeking 62,000 metric tonnes of wheat in a tender to be concluded Thursday, an agriculture ministry official said Tuesday. And Saudi Arabia is also in the market.