September 2, 2008
US Wheat Outlook on Tuesday: 30-35 cents lower on weak crude, firm dollar
U.S. wheat futures are expected to start lower Tuesday in a broad-based sell-off of commodities led by a slide in crude oil and strength in the dollar.
Chicago Board of Trade December wheat is called to open 30 to 35 cents per bushel lower. In overnight electronic trading, CBOT December wheat tumbled 33 3/4 cents to US$7.67 1/2.
Steep losses in crude oil knocked down the grains overnight and should keep the markets on the defensive during the day session, traders said. The firm U.S. dollar should add pressure, as a strong greenback translates into less buying power for the countries that import U.S. wheat.
CBOT corn and soybeans are called to open sharply lower, along with wheat. Spillover selling from the row crops will weigh on wheat, particularly if they fall by the daily, exchange-imposed limits, traders said.
"It's going to start out ugly," a CBOT floor trader said about Tuesday's day session. "It looks like a rout in commodities, with the dollar being firmer."
Tuesday is the first day back for traders after a three-day holiday weekend. CBOT December wheat Friday hit a fresh three-week low and closed at a bearish weekly low close.
The next "bold" support area and target for CBOT December wheat is US$7.87, according to a research note from FuturesTechs. A move below that price opens the door to test the May 29 low of US$7.68, the firm said.
"Bears have solid downside technical momentum," a technical analyst said. "Traders will continue to monitor the key "outside markets" - crude oil and the U.S. dollar - for direction. Those markets have been bearishly postured for wheat recently."
The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at the August low of US$7.71, the technical analyst said. The bulls' next upside price objective is to push and close December futures prices above solid technical resistance at US$8.50, he said.
First resistance is seen at US$8.20 and then at US$8.30. First support lies at Friday's low of US$7.98 1/2 and then at US$7.90.
Liffe's Paris milling wheat sank sharply lower Tuesday, with the front-month November contract down EUR6, or 3.3% at EUR176/tonne, on weakness in the general commodity sector, especially crude oil and overnight CBOT grains. November broke below its recent range low of EUR181/tonne and last autumn's low of EUR176/tonne to trigger further technical selling and set 13-month-low of EUR175.75/tonne.
Forecasts for record global wheat production in 2008-09 continue to hang over the markets. Expanded plantings and mostly favorable weather are projected to boost production.
Most of Australia's wheat areas had some rain during the past few days. The heaviest rainfall was 0.30 to 1.25 inches, with locally heavier totals, and occurred through central and northern New South Wales, DTN Meteorlogix said.
The weekend moisture favors vegetative to late-jointing wheat. Still, Australia's wheat crop still needs more rain to reach its full potential, industry participants said.