September 15, 2008
US Wheat Outlook on Monday: Seen lower on spillover pressure
Weak outside markets, jitters about financial woes and a lack of bullish news are expected to pull U.S. wheat futures lower at the start of Monday's day session.
Chicago Board of Trade December wheat is called to open 10 to 15 cents per bushel lower. In overnight electronic trading, CBOT December wheat slipped 6 3/4 cents to US$7.12 1/2.
Sharp losses in crude oil and strength in the U.S. dollar are expected to weigh on the grain, traders said. A firm dollar adds pressure to wheat because it gives foreign importers less buying power.
"That is a very bearish combination," Vic Lespinasse, analyst for grainanalyst.com, said about the weaker crude and stronger dollar.
Crude prices traded at their lowest levels since February, after news that Lehman Brothers Holdings Inc. (LEH) filed for bankruptcy protection and Merrill Lynch & Co. (MER) sold itself to Bank of America Corp.(BAC). Anticipation of a "meltdown" in the U.S. financial sector has the grain markets on edge, a CBOT trader said.
Losses in the financial sector are "going to potentially be a huge factor" for the grains, Lespinasse said.
There wasn't much fresh news for wheat during the weekend, traders said. The fundamental outlook remains bearish amid expectations that the world will produce a record crop after farmers expanded plantings to take advantage of high prices.
Recent rainfall has helped recharge soil moisture for planting and early growth of winter wheat in the U.S. central and southern Plains, DTN Meteorlogix said. Warmer, drier weather this week should be favorable for fall field work, the private weather firm said.
Rain is needed to support favorable development of wheat in Argentina, especially through western crop areas, Meteorlogix said. But there appears to be a significant chance of rain developing in the region later in the week, the firm said.
The wheat markets continue to be on the lookout for demand news, an analyst said. Export business has slowed in recent weeks amid ideas that some sales may have been front loaded earlier in the marketing year, he said.
Morocco's state wheat buyer said Sunday that it bought 860,000 metric tonnes of soft milling wheat, of any origin, from importers inside the country. The wheat was purchased in a tender that closed Sept. 11.
"Wheat is searching for demand news," Midwest Market Solutions said in a note to clients.
CBOT December wheat Friday finished at a fresh 9 1/2-month low close. Bears still have "solid technical advantage," a technical analyst said, and a steep four-week downtrend is in place on the daily bar chart.
The next downside price objective for the bears is pushing and closing prices below psychological support at US$7 a bushel, the analyst said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at the August low of US$7.71 a bushel, he said.
First resistance is seen at US$7.34 1/4 and then at Friday's high of US$7.43 3/4. First support lies at last week's low of US$7.14 and then at US$7.
"It's apparent that selling strength is still the way forward," Futures Techs said in a market comment.