February 3, 2006

 

US Wheat Outlook on Friday: Up 1-3 cents on followthrough, US drought

 

 

U.S. wheat futures were called to open up 1 cents to 3 cents per bushel Friday on a continuation of Thursday's fund-led rally to contract highs in Kansas City Board of Trade hard red winter wheat and Minneapolis Grain Exchange spring wheat, brokers said.

 

While there was bullish fundamental news Thursday, including NOAA's confirmation of a deepening drought in the U.S Southwest, near-term dry forecasts for the droughty U.S. hard red winter wheat belt, the European Union's lowering of their subsidy and an announcement from India that it may import wheat, KCBT traders said that fund buying was the key in Thursday's gains.

 

In the overnight e-CBOT session, most-active March wheat at the Chicago Board of Trade closed up 2 3/4 cents at $3.50 after notching a 3-1/2-month high of $3.51 1/4 per bushel.

 

A close below $3.35 in CBOT March wheat would provide the bears with some fresh downside technical momentum, a technical trader said. First resistance is seen at $3.48 - Thursday's high - and then at $3.50. First support lies at $3.45 and then at $3.42.

 

"If this rally continues, it will have to be led by the corn," one KCBT wheat source said late Thursday. "With a little help from corn, KCBT March could challenge contract highs for a second consecutive day."

 

"Both wheat and corn are going to need some index fund buying," one CBOT broker said early Friday. "There is speculation that there may be some more index fund buying today as Deutsche Bank goes live."

 

Deutsche Bank (DB) announced Jan. 17 the upcoming launch of the DB Commodity Index Tracking Fund (DBC), which will list on AMEX (AMEX: DBC).

 

DBC is the first commodity-index-linked fund to be listed on a U.S. stock exchange and was designed to offer investors access to the Deutsche Bank Liquid Commodity Index - Excess Return (DBLCI), the bank said.

 

The DBLCI is a rules-based index, comprised of crude oil, heating oil, gold, aluminum, corn and wheat, the bank said.

 

Overnight U.S. wheat export news was quiet.