September 4, 2008

 

US Wheat Outlook on Thursday: 7-10 cents higher as markets extend recovery

 

 

U.S. wheat futures are poised to start Thursday's day session higher as the markets continue to recover from a sharp recent setback.

 

Chicago Board of Trade December wheat is called to open 7 to 10 cents per bushel higher. In overnight electronic trading, CBOT December wheat rose 9 1/4 cents to US$7.84.

 

The markets are due to extend Wednesday's bounce after falling "too far to the downside" in the past two weeks, a CBOT floor trader said. CBOT December wheat rose Wednesday on short-covering after sliding to a nine-month low Tuesday.

 

CBOT December wheat had dropped more than US$2 from its Aug. 21 high of US$9.59 1/2 to Tuesday's low of US$7.57. The contract hit a high of US$7.81 on Wednesday.

 

"We saw the bulls step back into the fray yesterday," FuturesTechs said in a market comment Thursday. "We've managed to hold onto this strength overnight as well, and are set to open near the highs. We'd suggest that strength should still be sold into though, especially while gap resistance at US$7.98 is looming above."

 

Bears have the solid technical advantage in the wheat markets, a technical analyst said. However, the grains continue to watch outside markets and could find some support from early gains in crude oil, a trader said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at this week's low of US$7.56 1/4, the technical analyst said. The bulls' next upside price objective is to push and close December futures prices above solid technical resistance at US$7.98 1/2, which would fill on the upside Tuesday's downside price gap on the daily chart, he said.

 

First resistance is seen at Wednesday's high of US$7.81 and then at US$7.98 1/2. First support lies at US$7.71 and then at US$7.56 1/4.

 

The markets are keeping an eye on weather in the Southern Hemisphere amid worries about the potential for crop losses due to dryness. Rain is needed to support favorable development of wheat in Argentina, especially through western crop areas, but the region should be mostly dry during the next seven days, DTN Meteorlogix said.

 

Australia, which benefited from weekend rains, should see another rain system in southern Queensland and northern New South Wales on Thursday, Meteorlogix said. Rain will favor late jointing to early reproductive wheat in this area.

 

Private estimates continue to float around for Australia's crop, which has suffered from severe droughts for the past two years. Australia's output may rise to 21 million to 22 million metric tonnes in 2008 on better rains, the managing director of Louis Dreyfus Commodities Australia Pty Ltd., said.

 

"It's all just a guessing game," a CBOT floor trader said about the estimates.

 

In other news, blockades of Argentine grain processing and export facilities by striking truckers spread Wednesday, threatening operations struggling to catch up with export commitments after a series of farm strikes earlier this year. The protests are more supportive to soybeans than wheat, although strength in the soy complex could help lift the grain floor, a CBOT trader said.