December 21, 2009

 

US Wheat Outlook on Monday: Mixed; technical weakness, choppy trade

 

 

U.S. wheat futures are expected to open mixed Monday amid a lack of fundamental news as the market takes its cue from neighboring markets.

 

In overnight trade, Chicago Board of Trade March wheat was down 1/4 cent to US$5.27 3/4 per bushel and July wheat was down 1/2 cent to US$5.52.

 

Traders and analysts say that wheat is likely to be a follower of corn and soybeans as there is little fundamental news. Technically, the market is under pressure, as the Kansas City and Minneapolis contracts last week "had their lowest trades since mid-October" analyst Tom Leffler said in a commentary for Farm Futures.

 

He added that "wheat was not able to find follow through upside overnight despite the higher closes back on Friday." Friday's gains in the market were attributed to short-covering.

 

Fundamentals are seen as weak, as supplies are ample and demand lackluster, in the U.S. and worldwide.

 

Choppy trade is expected due to light-volume holiday trade, which is expected to continue until the new year.

 

The next downside price objective for the bears is pushing and closing prices below solid technical support at the November low of US$5.07 1/2, a technical analyst said. The bulls' next upside price objective is to push and close March futures prices above solid technical resistance at last week's high of US$5.48 a bushel.

 

First resistance is seen at US$5.35 and then at US$5.40, the technical analyst said. First support lies at US$5.20 and then at last week's low of US$5.14 1/4.

 

In international news, Saudi Arabia plans to import two million tonnes of wheat in 2010, a similar amount to the projected amount in 2009, a top official at the Grains Silos and Flour Mills Organization, or GSFMO, said Monday.

 

Saudi Arabia has only recently started importing wheat because it is phasing out wheat production in an effort to conserve water. The oil-rich desert kingdom plans to import all of its domestic demand, around 3 million metric tonnes of wheat a year, by 2016, an official said.

 

Managed money added to their short positions in CBOT wheat in the week ended Dec. 15, the CFTC said in its Friday disaggregated Commitments of Traders report. The report showed that managed money traders cut 890 contracts from their long positions, leaving them with 60,621, and added 7,493 contracts to their short positions, for a total of 50,249. The front-month March contract lost three cents per bushel during that time period.