October 1, 2008

 

US Wheat Outlook on Wednesday: 4-6 cents up on short-covering, follow-through

 

 

Follow-through buying and short-covering are expected to boost U.S. wheat futures at the start of Wednesday's day session, although trading should be light and could turn two-sided, traders said.

 

Benchmark Chicago Board of Trade December wheat is called to open 4 to 6 cents per bushel higher. In overnight electronic trading, CBOT December wheat gained 6 1/2 cents to US$6.86 1/2.

 

Short-covering could support the markets, as speculative funds remain net short in CBOT wheat by about 40,000 contracts or so, a CBOT broker said. Wheat closed higher Tuesday on short-covering and bullishness about the U.S. Department of Agriculture's smaller-than-expected quarterly grain stocks estimate.

 

Traders will continue to watch outside and financial markets ahead of the U.S. Senate's vote on a modified version of the US$700 billion financial bailout, an analyst said. The vote is expected Wednesday night.

 

Uncertainty about the rescue package could push some traders to the sidelines, a trader said. Weakness in crude oil also could weigh on grain prices, he said.

 

Gains in wheat may be considered selling opportunities, FuturesTechs said in a market comment. The markets are still in a technical downtrend after recent sell-offs, a technical analyst said.

 

"It looks like we may see some short-term strength from here, but it will be the sort of strength that we'd use as a selling opportunity," FuturesTechs said. The first "bold resistance" level for CBOT December wheat is US$7.14 3/4, the firm said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$6.50, the technical analyst said. Bulls' next upside price objective is to push and close December futures prices above major psychological resistance at US$7.00, he said.

 

First resistance is seen at Tuesday's high of US$6.89 1/2 and then at US$7.00. First support lies at Tuesday's low of US$6.62 1/2 and then at US$6.50.

 

In other news, National Australia Bank pegged wheat production Down Under at 20.8 million metric tonnes, compared to the official government forecast of 22.5 million. The latest estimate should not create many waves in the markets, as traders are comfortable with a crop of 20 million to 24 million tonnes, a broker said.

 

There could be some frost in Victoria and southern New South Wales wheat areas by Monday after rains in New South Wales, DTN Meteorlogix said. Any flowering wheat would be at risk if temperatures fall to 30 Fahrenheit or colder, the private weather firm said.

 

In Argentina, a few showers are possible Wednesday through Friday after some rain fell during the weekend, according to Meteorlogix. Rainfall will help improve the outlook for wheat after a dry late fall and winter period, the firm said.

 

The leaders of Argentina's four top farm groups announced Tuesday a six-day strike running to Oct. 8 in which farmers will not buy or sell grains but won't block roads like during the crippling series of strikes launched earlier this year. The strike shouldn't impact U.S. grain markets much as, "we're worried about our own problems," a CBOT floor analyst said, referring to economic strains.