August 20, 2008

 

US Wheat Outlook on Wednesday: Seen up, but two-sided trade possible

 

 

U.S. wheat futures are expected to follow Chicago Board of Trade corn and soybeans higher at the start of Wednesday's day session, although trading could easily turn two-sided as volatility remains high.

 

CBOT September wheat is called to open 7 to 9 cents per bushel higher. In overnight electronic trading, CBOT September wheat climbed 9 cents to US$8.54 1/4, while CBOT December wheat gained 8 cents to US$8.78 1/4.

 

Wheat continues to trade in a wide range, with price movements influenced by activity in neighboring and outside markets. CBOT corn and soybeans were firmer overnight, along with crude oil and gold.

 

But there is not much confidence in wheat's overnight trend as volume was low, traders said. Solid export business continues to offer support, although demand is not strong enough to sustain a rally in the wheat pits without help from the other markets, said Arlan Suderman, market analyst for Farm Futures.

 

"Look for wheat to trade both sides of unchanged unless the corn and soybean markets are able to sustain strong gains throughout the session today," Suderman said.

 

Concerns about dryness in wheat growing areas of Australia and Argentina remain in the backs of traders' minds. A deepening trough over eastern Australia during the next few days may mean at least some shower activity will hit crops Down Under, according to a forecast from DTN Meteorlogix. Cold, dry weather is then on tap to return to the region, the private weather firm said.

 

Newly harvested wheat was delivered Monday into GrainCorp Ltd.'s (GNC.AU) storage facilities at the central Queensland town of Emerald, a spokesman for the company said late Tuesday. Most of the Australian wheat crop is harvested in November and December, though crops in northern growing areas typically mature earlier.

 

In Argentina, the next significant chance for shower activity appears to be next Wednesday into Thursday, Meteorlogix said. Argentina and Australia "face opportunities for showers, but significant relief remains a distant hope," Suderman said.

 

CBOT December wheat Tuesday closed lower after a "very choppy" session, a technical analyst said. The bulls have the slight near-term technical advantage in wheat, but the upside is limited if prices approach major psychological resistance at US$9.00, he said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$8.50, the analyst said. Bulls' next upside price objective is to push and close the contract above solid resistance at last week's high of US$9.12 3/4, he said.

 

First resistance is seen at US$8.80 and then at US$8.90. First support lies at Tuesday's low of US$8.66 and then at US$8.50.

 

FuturesTechs, in a market comment said, bearishness "seems to have been brushed aside" the overnight gains in CBOT December wheat. A "fresh look" at US$9.00 to US$9.12 3/4 appears likely going forward, the firm said.

 

A move of CBOT December wheat above the area around US$9.13 would inspire renewed confidence from bulls in the market and inspire fresh buying, a CBOT floor trader said. The contract is above its 45-, 50- and 100-day moving averages.