December 30, 2009

 

US Wheat Outlook on Wednesday: Seen starting up on year-end positioning

 

 

Year-end positioning is expected to carry U.S. wheat futures higher early Wednesday in choppy, thin trading.

 

Chicago Board of Trade March wheat is called to open 2 cents to 4 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 3 1/2 cents at US$5.44 1/2.

 

Short-covering should help support prices as the grain markets chop around ahead of the end of the year, a trader said. Non-commercial speculative funds hold a large net short position in CBOT wheat.

 

Chatter continues about the potential for index funds to rebalance their positions in the grain markets early in 2010. It seems there has been some buying in anticipation of the fund re-allocations, which are expected to bring money into the markets, analysts said.

 

"Traders will be reluctant to sell the market in front of the new year purchasing barrage by the funds," Benson Quinn Commodities said in a note. "This should keep losses in check for the next couple of weeks."

 

The next upside target for CBOT March wheat is US$5.70, a technical analyst said. Closes below US$5.26 are needed to suggest a short-term top has been posted, he said.

 

First resistance is Tuesday's open-outcry high of US$5.53, with second resistance seen at US$5.70, the technical analyst said. First support is the 10-day moving average crossing at US$5.30 3/4, and second support is seen at US$5.26, he said.

 

There is a lack of fresh supply or demand news to influence the markets, traders said. The fundamental storyline for wheat remains bearish, with world supplies seen as large and U.S. export demand considered soft.

 

Temperatures in the Midwest and in the central and southern Plains do not look cold enough to harm dormant wheat during the next five to seven days, according to private weather firm DTN Meteorlogix. Snow cover through the northern Plains wheat belt should be enough to protect the crop from recent cold conditions, the firm said.

 

"Things still look to remain fairly quiet across the Plains and Midwest in the next week to ten days," Midwest Market Solutions said. "A couple of weak clipper type systems will dust the northern Plains and northern half of the Midwest with some light snows from time to time, but nothing major looks to occur."

 

Colder weather is possible in Ukraine and Russia during the weekend or early next week, but it does not look cold enough to harm dormant wheat, Meteorlogix said. Ukraine and Russia have become important wheat exporters on the world market and compete with the U.S. for business.