September 18, 2008

 

US Wheat Outlook on Thursday: 7-10 cents up on outside markets, follow-through

 

 

Follow-through buying and support from rallies in outside markets are expected to carry U.S. wheat futures higher at the start of Thursday's day session.

 

Benchmark Chicago Board of Trade December wheat is called to open 7 to 10 cents per bushel higher. In overnight electronic trading, CBOT December wheat jumped 9 1/4 cents to US$7.35.

 

The wheat markets are poised to extend gains after closing sharply higher Wednesday on short covering and spillover strength from other markets. Wheat was due for a rebound after falling hard since spiking to a high on Aug. 21, an analyst said.

 

Surging outside markets, including gold and crude oil, are setting a bullish tone for the grains again, a CBOT floor trader said. Weakness in the U.S. dollar also should boost grains, as a soft greenback gives foreign importers more buying power, an analyst said.

 

Total weekly U.S. wheat export sales of 632,300 metric tonnes were strong and above trade estimates of 300,000 to 550,000 tonnes. Demand is favoring higher protein wheat, with hard red winter wheat sales comprising 302,000 tonnes of the weekly sales for delivery in 2008-09, a trader said.

 

Along with export demand, traders continue to keep an eye on the weather, although fundamentals seem to be on the backburner compared to what's happening in outside markets and in the U.S. financial sector, a CBOT trader said. Traders seized the opportunity to buy crude oil Thursday as the dollar moved lower when international central banks promised to inject capital into struggling financial markets.

 

Wheat in Argentina has a chance to get showers through western and northern areas Thursday and Friday, but more widespread rain will be needed to ease concerns about early spring growth, DTN Meteorlogix said. In Australia, the next chance for significant shower activity appears to be early next week and mostly from central New South Wales northward into southern Queensland, the private weather firm said.

 

In other news, Strategie Grains increased its European Union soft wheat forecast to 137.6 million tonnes, up 3.7 million tonnes on the month and up 23% from 2007-08. Ample supplies are priced into the markets as traders know there is a lot of wheat around, a trader said. The world is expected to produce a record crop in 2008-09 after farmers expanded plantings to take advantage of high prices.

 

Paris milling wheat futures were higher Thursday, mainly on support from outside markets, a broker said. The world wheat markets will need a supply shock to see a real price increase, he said.

 

The next downside price objective for the bears is pushing and closing CBOT December below solid technical support at this week's low of US$6.86 1/4, 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 this week's high of US$7.39 1/2 and then at US$7.50. First support lies at US$7.14 and then at US$7.00.