September 24, 2008

 

US Wheat Outlook on Wednesday: 5-7 cents higher, following outside markets

 

 

U.S. wheat futures are poised to start Wednesday's day session firmer on spillover support and amid some ideas that the markets' technical trend is looking less bearish.

 

Chicago Board of Trade December wheat is called to open 5 to 7 cents per bushel higher. In overnight electronic trading, CBOT December wheat jumped 7 1/2 cents to US$7.58.

 

Wheat is expected to follow crude oil, CBOT corn and soybeans higher at the opening bell, a CBOT trader said. Commodities are feeling some support from a sense that a little more calm is returning to financial markets after recent turmoil, an analyst said.

 

"Wheat should follow the other markets higher on the open initially, as futures at all three exchanges try to confirm a bottom," said Bryce Knorr, Farm Futures senior editor. "That's been a tough row to hoe lately, due to the huge world crop and instability in the financial markets."

 

CBOT December wheat overnight set a new weekly high of US$7.60, exceeding the week's previous high of US$7.57 3/4, which was encouraging to bulls, an analyst said. On Tuesday, the contract ended near the session high and at a fresh three-week high close.

 

However, volume was thin Tuesday, so traders cautioned against reading too much into the move. Wheat bears still have the near-term technical advantage, and prices are still in a four-week-old downtrend on the daily bar chart, a technical analyst 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$7.15, the technical 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, he said.

 

First resistance is seen at this week's high of US$7.57 3/4 and then at US$7.71. First support lies at US$7.38 and then at US$7.25.

 

Demand for U.S. wheat remains solid, although the pace of export sales is nothing "to get crazy about," a trader said. The state-run Grain Board of Iraq has purchased 100,000 and 200,000 metric tonnes of Russian wheat at US$300 a tonne FOB, supplier Glencore confirmed.

 

Traders continue to watch weather in Southern Hemisphere growing areas. There appears to be a fair-to-good chance for "significant rain" in West Australia's wheat belt, which would help the crop recover from frosts early this week and from dry weather in August, DTN Meteorlogix said.

 

Scattered showers and thundershowers are expected to develop Saturday into Sunday in Argentina, where rain is needed to support early spring growth of wheat, Meteorlogix said. It will be very warm ahead of the disturbance and cooler after it, the firm said.