March 30, 2010

 

US Wheat Outlook on Tuesday: Seen starting higher, consolidating

 

 

U.S. wheat futures are expected to start stronger Tuesday after rising overnight, then consolidating ahead of the end of the month and key crop reports due Wednesday.

 

Nearby Chicago Board of Trade May wheat is called to open 2 cents to 4 cents per bushel higher. In overnight electronic trading, CBOT May wheat rose 4 1/2 cents, or 1%, to US$4.69 1/4.

 

Wheat continues to be a follower of other markets, including neighboring CBOT corn and soybeans and the U.S. dollar, an analyst said. The other markets are sending supportive signals as corn and soy edged higher overnight and the dollar slipped, he said.

 

It wouldn't be surprising to see wheat consolidate and trade both sides before the U.S. Department of Agriculture issues its annual prospective plantings and quarterly grain stocks reports Wednesday, a CBOT trader said. Position-evening is expected, with traders uncertain about how much spring wheat, corn and soybeans farmers intend to plant this spring.

 

Wheat finished unchanged to lower Monday as the markets were unable to hang on to gains. Prices may rebound Tuesday, but traders will be reluctant to push the market too hard ahead of the reports and the end of the month, an analyst said.

 

"The extent of the bounce could be muted ahead of Wednesday's report and without supportive fundamental news," said Brian Hoops, president of Midwest Market Solutions.

 

Fundamentals are unsupportive because world supplies are ample and there is intense competition for export business. Japan, a routine buyer of U.S. wheat, said it was unlikely to hold a tender this week because it had enough stocks to meet its import requirements until May.

 

Weather conditions for U.S. wheat look mostly beneficial. Rains this weekend and warm weather this week "will maintain favorable conditions through most wheat areas" of the central and southern Plains, according to private weather firm DTN Meteorlogix.

 

Non-commercial speculative funds are heavily short in CBOT wheat, which leaves the door open for potential short-covering. However, funds "are actually making money on those shorts so there's no reason to expect that they'll want to cover anytime soon," according to a note from Spectrum Commodities.

 

The next downside price objective for bears is pushing and closing CBOT May wheat below solid technical support at US$4.50, a technical analyst said. Bulls' next upside price objective is to push and close March futures prices above solid technical resistance at US$5.00, he said.

 

First resistance is seen at US$4.72 and then at US$4.80. First support lies at Monday's and the contract low of US$4.64 and then at US$4.60, the technical analyst said.