August 26, 2009

 

US Wheat Outlook on Wednesday: Seen steady-to-higher, waiting for Egypt

 

 

U.S. wheat futures are expected to start steady to slightly higher Wednesday as the markets take their cue from overnight activity and traders wait for the results of an Egyptian tender.

 

Chicago Board of Trade December wheat is called to open flat to 2 cents per bushel higher. In overnight electronic trading, Chicago Board of Trade December added 3/4 cent to US$4.99 1/2.

 

Wheat will try to "hold the line on any further selling" after a mixed close Tuesday, said Bryce Knorr, analyst for Farm Futures. The markets on Tuesday ended well off their highs, with only Kansas City Board of Trade wheat able to finish in positive territory.

 

Traders are waiting to see what Egypt books in a tender for wheat. There has been "fierce competition for sales," as world supplies are large, Knorr said.

 

Last week, Egypt bought 270,000 tonnes of wheat, including 120,000 tonnes of U.S. soft red winter wheat, in a tender. It filled the rest of the tender with French, Russian and Canadian wheat.

 

Overall, fundamentals continue to look weak, analysts said. The markets could find some support from short-covering, although price action Tuesday showed that rallies are difficult to sustain, they said.

 

"Demand is weak and supplies are plentiful," Country Hedging said in a note.

 

In other news, North Dakota's spring wheat harvest is expected to advance during the next few days after a slow start, Country Hedging said. Development and harvest during the summer have been slower than normal this year due to late planting and cool conditions.

 

The northern U.S. Plains have seen rain recently, which is not helpful to harvest, but conditions should turn drier in the coming days, according to a forecast from DTN Meteorlogix. Cooler weather may arrive in eastern areas by Friday and Saturday of this week, the private weather firm said.

 

Argentina continues to struggle with drought, especially in major western growing areas, Meteorlogix said. The region remains mainly dry through Sunday, with a chance for a few light showers Monday, and temperatures will average well above normal until the showers develop, the firm said.

 

In Australia, dry weather continues through Friday in northern New South Wales and Queensland, which need rain to maintain current yield prospects, according to Meteorlogix. Showers are possible during the weekend, especially through northern New South Wales, but the showers look mostly light to locally moderate, the firm said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.50, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at the July low of US$5.32 3/4, he said.

 

First resistance is seen at last week's high of US$5.08 3/4 and then at Tuesday's high of US$5.16 1/2, the analyst said. First support lies at Tuesday's low of US$4.94 and then at the contract low of US$4.85 1/2, he said.