September 26, 2008


US Wheat Outlook on Friday: Seen weaker, waiting for bailout plan



Uncertainty about a package to rescue the U.S. financial sector is expected to weigh on U.S. wheat futures at the start of Friday's day session, but markets could firm up on signs of a deal.


Chicago Board of Trade December wheat is called to open 5 to 10 cents per bushel lower. In overnight electronic trading, CBOT December wheat sank 9 1/2 cents to US$7.26 3/4.


Traders continue to watch outside and financial markets after plans for the government's US$700 billion bailout were thrown into disarray Thursday. Negotiators were set to resume talks Friday morning.


"Until they get things kind of straightened out in Washington D.C., it's going to keep us under pressure," Larry Glenn, broker/analyst for Frontier Ag, said about wheat. "The night session told us that."


The bailout is "the focus of everybody," Glenn said. Volume has been thin in CBOT, Kansas City Board of Trade and Minneapolis Grain Exchange wheat pits this week as traders moved to the sidelines while waiting for signs of an agreement.


"I think the market is just kind of set up to get this news, get this news behind us," Glenn said about a bailout plan. "Before the day's over, I think we'll be ok. I think we'll bounce this thing back."


Weakness in crude oil futures was seen as a bearish influence on the grains, trader said.


There was little fresh fundamental news out for the wheat markets overnight. Once the government announces a rescue plan, traders will refocus attention on demand, a broker said.


Demand for U.S. wheat in general has been "strong, but not strong enough," a trader said. Egypt and Iraq this week bypassed U.S. wheat and bought Russian wheat in tenders.


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, a technical analyst said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at this week's high of US$7.60.


First resistance is seen at Thursday's high of US$7.41 and then at US$7.50. First support lies at Thursday's low of US$7.20 and then at this week's low of US$7.15.


Looking at the weather, much-needed rain continued Friday over West Australia's wheat belt, DTN Meteorlogix. So far, the rains have brought 1/4 to 1 inch of rain to the region, which should help this crop recover from recent frosts and dry weather in August, the private weather firm said.


Showers are possible during the next few days in Argentina, but rainfall amounts and coverage are somewhat uncertain, Meteorlogix said. Dryness is hurting early spring growth of wheat is some areas.

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