December 19, 2008
US Wheat Outlook on Friday: Drop seen on dollar strength, profit-taking
U.S. wheat futures are expected to give up some of the week's gains Friday, as traders expect profit-taking and a stronger U.S. dollar to rule the day.
Chicago Board of Trade March wheat is called to open 10 to 12 cents per bushel lower. Since opening Monday at US$5.33, the contract gained 38 1/2 cents in value.
In overnight electronic trading, CBOT March wheat lost 12 1/4 cents to US$5.59 1/4. Kansas City March wheat shed 9 1/2 cents to US$5.81 and Minneapolis Grain Exchange wheat dropped 12 1/2 cents to US$6.18 1/2.
Speculative fund buying Thursday was estimated at 3,000 lots, bringing their total outstanding short position to around 14,000 contracts.
Traders attribute the lower calls and overnight drops in CBOT grains and soy to a markedly stronger dollar index.
"The whole thing is outside markets," a CBOT floor trader said. "And it's Friday and people won't be here next week, so they're evening up."
Winterkill talk continues.
"Weather fears and short-covering in the Chicago market could continue to drive prices even higher," said Dave Lehl, an analyst at Benson Quinn Commodities.
"It's all about fear and greed," he added.
CBOT March wheat hit a new four-week high in Thursday's trading session and closed near the day's high.
While bears maintain "the overall near-term technical advantage,the bulls have gained momentum this week and a bullish weekly high close on Friday would provide the bulls better technical momentum," a market technician said.
Wheat bears are aiming close below the week's low at US$5.15, " he said, marking first support at Thursday's low of US$5.53 1/2, then at Wednesday's low of US$5.40 1/2.
Wheat bulls gun to pierce solid technical resistance at US$5.78, the technician said.
The extent of possible winterkill damage is a popular matter of debate this week. Some meteorologists say the lack of snow cover in the western Plains areas along the Colorado-Kansas border will present problems during sub-zero weather forecast for this weekend.
But "episodes of subzero temperatures through the northern sections of the belt should not be damaging as the crop is well established," said DTN Meteorologix.
This week Kansas State Extension agronomist Jim Shroyer noted that drought-stressed wheat is most susceptible to winterkill.
He said most of the Kansas crop is in good shape for the bitter cold, but noted three southwestern counties exhibit conditions that make the crop vulnerable.
Mostly dry conditions are speeding the harvest of Argentina's drought-stressed crop, which is now ahead of last year's pace, Meteorologix said.
In Australia, wet conditions continue to create an "unfavorable" environment for maturing wheat and "will likely delay the wheat harvest," the private weather firm said.
In global trading news, India expects no local wheat supply issues, despite a 200,000 reduction in wheat acreage.
The country's wheat supply will exceed local demand for the fiscal years ending March 2009 and 2010, Akhilesh Prasad Singh, the country's junior food minister, said Friday, hinting that there won't be any need for imports.