October 3, 2008

US Wheat Outlook on Friday: Slightly up on rebound, short-covering


U.S. wheat futures are poised to start Friday's day session slightly firmer in a rebound from heavy losses Thursday, although the markets could weaken on spillover pressure.


Benchmark Chicago Board of Trade December wheat is called to open 1 cent to 3 cents per bushel higher. In overnight electronic trading, CBOT December wheat rose 2 3/4 cents to US$6.38 3/4.


Profit-taking by holders of short positions should push wheat higher after nearby contracts fell nearly 5% on Thursday, said Larry Glenn, broker/analyst for Frontier Ag. As of Thursday's close, CBOT December wheat was down 80 cents on the week.


"I expect a little bounce back," Glenn said. "I think they did enough damage yesterday, and we'll bounce this thing back up."


The markets continue to watch developments in Washington, where the House of Representatives is set to vote again on a US$700 billion rescue package for the financial sector, Glenn said. Concerns about an economic slowdown weighed on commodities Thursday.


Wheat also will keep an eye on outside markets. Strength in the dollar and a weaker tone in crude oil could be a bearish influence on the grains, as a firm dollar makes U.S. commodities more expensive, an analyst said.


The technical outlook for wheat also is weak, with CBOT December wheat stuck in a technical downtrend, analysts said.


The next downside price objective for the bears is pushing and closing CBOT December wheat below psychological support at US$6.00, a 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 US$6.50 and then at Thursday's high of US$6.77 3/4. First support lies at Thursday's low of US$6.31 and then at US$6.25.


Fundamentals continue to take a back seat to the financial and outside markets, Glenn said. There was not much fresh news out overnight.


Rainfall in Argentina on Friday may help improve the condition of the wheat crop after a very dry late autumn and winter period, DTN Meteorlogix said. Colder weather is expected during the weekend, with a secondary cold air mass possible early next week. 

Frost or freezing conditions are possible in La Pampa, southern and eastern Buenos Aires either during the weekend or early next week, Meteorlogix said. Any flowering wheat would be at risk of damage should temperatures fall to 30 degrees Fahrenheit for one or two hours, according to the private weather firm.


In Australia, New South Wales and Queensland should see beneficial rains during the weekend, Meteorlogix said. Cold weather is expected later this weekend and early next week, with a frost likely and a freeze possible in Victoria, southeastern South Australia and extreme south New South Wales, the firm said.

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