March 23, 2010

 

US Wheat Outlook on Tuesday: Seen mixed; choppy trade expected

 

 

U.S. wheat futures are expected to start mixed Tuesday and take direction from other markets in choppy, two-sided activity.

 

Nearby Chicago Board of Trade May wheat in overnight electronic trading ended down 1/2 cent, or 0.1%, at US$4.86 a bushel.

 

Trading overnight was quiet and choppy amid a lack of fresh news and strong leadership from other markets. Neighboring CBOT May corn finished unchanged overnight, while May soybeans crawled slightly higher.

 

Wheat has been range-bound lately and a follower of neighboring markets and the U.S. dollar. Outside markets look mildly bearish for the grains Tuesday because the U.S. dollar is rising, but they're offering little strong direction, a trader said. A firm dollar is often considered negative because of perceptions it makes U.S. grain less attractive to foreign buyers and reduces investors' appetite for risk.

 

The U.S. continues to face stiff competition for export business because world supplies are large. There is chatter that French wheat, which is less expensive than U.S. wheat, is being exported to Latin America and Asia, a trader said.

 

Supportive demand news was scarce overnight. Japan, a routine buyer of U.S. wheat, said it was unlikely to issue a wheat import tender this week but did not give a reason.

 

The markets could find some support from technical short-covering, which helped prop up prices Monday, a trader said. Non-commercial speculative funds are heavily short in CBOT wheat futures and options and may want to lighten up their short position, he said.

 

In other news, traders are waiting for the U.S. Department of Agriculture to issue its prospective plantings and quarterly grains stocks reports March 31. Trading should remain choppy until the reports come out and remove uncertainty from the grain markets, an analyst said.

 

The next downside price objective for bears is pushing and closing CBOT May wheat below solid technical support at the contract low of US$4.72, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.10, he said.

 

First resistance is seen at Monday's high of US$4.92 3/4 and then at US$5.00. First support lies at Monday's low of US$4.82 1/4 and then at US$4.72, the analyst said.