September 17, 2008
US Wheat Outlook on Wednesday: Up on technical bounce, waits for Egypt
U.S. wheat futures are expected to start Wednesday's day session firmer in a technical rebound from losses, with traders keeping an eye on outside markets and waiting for the results of an Egyptian tender.
Chicago Board of Trade December wheat is called to open 10 to 20 cents per bushel higher. In overnight electronic trading, CBOT December wheat climbed 18 cents to US$7.08.
Wheat bounced overnight, along with CBOT corn and soybeans, after broad-based liquidation dragged commodities lower Tuesday. Strength in outside markets like crude oil and metals should help support the grains amid news the government bailed out American International Group Inc. (AIG), a CBOT floor analyst said.
Outside markets look as though they are "showing a little stability," said Shawn McCambridge, analyst for Prudential Bache in Chicago. The bailout of AIG should "ease concerns that we could see aggressive long liquidation," he said.
Wheat is in an oversold condition after sliding for the past three weeks, an analyst said. CBOT December wheat Tuesday hit a fresh 10-month low and closed below psychological support at US$7.00.
Traders are waiting to see the results of a tender from Egypt's state-owned General Authority for Supply Commodities, although fundamentals may take a backseat to outside influences, an analyst said. GASC is tendering for wheat for shipment Oct. 21-31.
The Black Sea should continue to be "quite aggressive" in the export market, but Egypt may shy away from buying from the region if quality becomes more of an issue, McCambridge said. Ukraine has more feed quality wheat than usual this year and less milling quality wheat, according to reports.
The next downside price objective for the bears is pushing and closing CBOT December wheat below technical support at US$6.50, a technical analyst said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at US$7.50, he said.
First resistance is seen at US$7.00 and then at US$7.14. First support lies at Tuesday's low of US$6.86 1/4 and then at US$6.65.
Expectations that the world will grow more wheat in 2008-09 than ever before continue to be a bearish fundamental factor for the markets, an analyst said. Russia's grain harvest this year is likely to be 109.7 million metric tonnes in bunker weight and 100-102 million tonnes in clean weight, a record since the collapse of the Soviet Union in 1991, the agriculture ministry said.
Looking at the weather, warmer, drier weather in the U.S. central and southern Plains this week should be more favorable for fall field work, DTN Meteorlogix said. Long-range charts suggest a return to wet weather is possible later in the 10-day period, the private weather firm said.
In Argentina, where wheat is struggled with dryness, there appears to be a chance for showers Thursday into Friday. However, compared to Tuesday, "the chance has diminished somewhat and the coverage of any significant rain appears to have diminished," Meteorlogix said.
The next chance for significant shower activity in Australia wheat areas appears to be early next week and mostly from central New South Wales northward into southern Queensland, the weather firm said. Rainfall in this area would favor jointing to reproductive wheat, but Meteorlogix cautions the outlook it long range.