December 29, 2008
US Wheat Outlook on Monday: Up on technical buying, spillover buying
U.S. wheat futures are poised to start Monday's day session higher on technical buying and spillover support from rallies in neighboring markets.
Chicago Board of Trade March wheat is called to open 10 to 15 cents per bushel higher. In overnight electronic trading, CBOT March wheat jumped 16 1/2 cents to US$6.15 3/4.
Wheat is a "big follower of corn and soybeans," said Brian Hoops, president of Midwest Market Solutions. CBOT corn and soybeans climbed overnight and are expected to start stronger Monday.
Grain and soybean futures have been trending upward since early December after commodities tumbled under pressure from the global credit crisis. CBOT March wheat on Friday had gained US$1.28 1/4 since slipping to US$4.71 in open outcry trading on Dec. 5.
"Corn, beans and wheat have probably completed the last down-leg when the economy was so bad in November and December," Hoops said. "We're started to see a recovery."
Short-covering could help support gains as speculative funds remain net short in CBOT wheat, a CBOT broker said. The next upside target for CBOT March wheat is US$6.65 and then US$7.25, Hoops said.
The Commodity Futures Trading Commission is slated to issue weekly Commitments of Traders data at 3:30 p.m. EST Monday. The reports, normally released on Fridays, were delayed a day because of Christmas.
"We've broken the downtrend, so we're getting some short-covering, Hoops said.
Trading is expected to remain thin and choppy, with the markets still in holiday mode, a trader said. The CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange will be closed Thursday for New Year's Day.
Weakness in the U.S. dollar is seen as supportive because it gives foreign countries more buying power to import U.S. grains, traders said. Strength in crude oil is another supportive factor, they said. Crude oil is linked to the grains because funds often trade in a basket of commodities and because ethanol is made from corn.
It is mildly supportive that Pakistan said it will receive 250,000 metric tonnes of wheat from the U.S. by March, a CBOT broker said. The wheat will probably be white wheat, he said.
Weather conditions for U.S. winter wheat look non-threatening, according to forecasts from DTN Meteorlogix. There are "no significant cold weather threats" for hard red winter wheat on the U.S. central and southern Plains during the next seven days, the private weather firm said.
Rain and snow melt caused by warm weekend temperatures threatens to cause serious flooding along some of the key rivers of the Midwest region, especially in Illinois, Indiana and Michigan, Meteorlogix said. However, there is "no significant risk to the soft red winter wheat crop at this time," the firm said.