December 31, 2009

 

US Wheat Outlook on Thursday: Seen up on positioning; trade awaits Egypt

 

 

U.S. wheat futures are poised to start stronger Thursday on positioning and support from the weaker dollar, although traders don't expect the U.S. to win business in an Egyptian tender.

 

Chicago Board of Trade March wheat is called to open 3 cents to 5 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 4 3/4 cents to US$5.49 1/2.

 

Traders are expected to square up positions ahead of the end of the year amid expectations for index funds to buy in early 2010, analysts said. Short-covering could give prices a boost as speculative funds hold a large net short position in CBOT wheat, a trader said. The large short position makes market participants "nervous," he said.

 

Weakness in the U.S. dollar is seen as "slightly supportive" for the grains because it makes U.S. commodities more attractive to foreign buyers, a CBOT trader said. CBOT soybeans and corn were firmer overnight with wheat.

 

The next upside target for CBOT March wheat is US$5.70, and closes below US$5.26 are needed to suggest a short-term top has been posted, a technical analyst said. First resistance is at US$5.53, and second resistance is at US$5.70, he said. First support is at US$5.31 1/2, and second support is US$5.26, he said.

 

Traders are waiting to see the results of an Egyptian tender, but U.S. wheat is likely too expensive to be included, analysts said. Egypt is a major buyer on the world wheat market that is known form being price sensitive. It has been making purchases from Russia and Europe.

 

Weekly U.S. wheat export sales of 370,300 tonnes were in line with trade estimates of 200,000 tonnes to 550,000 tonnes. The sales were up 67% from the previous week and 23% from the prior four-week average, according to the U.S. Department of Agriculture.

 

Export demand for U.S. wheat has been sluggish due to competition from sellers in the Black Sea region and Europe. Buyers haven't been in a rush to book their purchases because there is plenty of wheat to go around, traders said.

 

In Argentina, several days of rainfall slowed the 2009-10 wheat harvest in southern Buenos Aires province, where the last fields remain to be harvested, the Buenos Aires Cereals Exchange said. Production is down hard from last year due to drought and reduced plantings.

 

In the U.S., hard red winter wheat in the central and southern Plains has "pretty good snow cover" to protect it from cold weather, but it could "probably use more" in select areas, a trader said. Private weather firm DTN Meteorlogix said cold temperatures "are not expected to be cold enough to harm dormant wheat during the next seven days" but a cold pattern bears watching.