October 7, 2008

 

US Wheat Outlook on Tuesday: Seen higher in rebound from sell-off

 

 

U.S. wheat futures are poised to start Tuesday's day session firmer in a bounce from Monday's sell-off, with traders keeping their attention on neighboring and outside markets.

 

Chicago Board of Trade December wheat is called to open 10 to 12 cents per bushel higher. In overnight electronic trading, CBOT December wheat jumped 12 3/4 cents to US$6.08.

 

Wheat is due for a technical rebound after falling hard Monday on global financial turmoil, traders said. Wheat bears have the solid near-term technical advantage, but the markets are "now short-term oversold and due for an upside corrective bounce," a technical analyst said.

 

CBOT December wheat should face resistance at US$6.36, Futures Techs said in a market comment. The trend remains "firmly bearish," the firm said.

 

"We are outright bearish below US$6.36, but there is a glimmer of hope for the beaten up bulls if they can see us back through here," Futures Techs said.

 

Wheat could feel spillover support from CBOT corn and soybeans, which are called to open firmer after ending limit down Monday. Wheat remains "largely controlled by the neighboring corn and soybean futures trade," Allendale said in a research note.

 

Strength in crude oil and weakness in the U.S. dollar should lend the grains additional support, traders said. A weak dollar makes grains less expensive for foreign buyers.

 

Traders are still waiting to see the results of an Egyptian tender, although their focus remains on other markets, an analyst said. Egypt's state-owned General Authority for Supply Commodities said it was tendering to buy at least 55,000 to 60,000 metric tonnes of wheat for shipment Nov. 1-15 on a free-on-board basis.

 

Egypt is expected to snub the U.S. again in favor of Black Sea wheat, Allendale said. Egypt bought 120,000 tonnes of Russian wheat in its most recent tender Sept. 25.

 

Japan said it was not holding its weekly wheat import tender this week due to recent issues with contaminated rice imports, an official said. In other news, U.S. winter wheat planting was 59% complete as of Sunday, exceeding the 54% reported last year and just below the five-year average of 60%, according to the U.S. Department of Agriculture.

 

Widespread rain and thunderstorms in the U.S. central and southern Plains early this week will help improve conditions for germination and early growth of winter wheat, especially after recent hot and dry weather, DTN Meteorlogix said. Some field work delays are expected, the private weather firm said.

 

In Australia, showers in New South Wales wheat areas during the weekend improved conditions for the crop. However, wheat areas in South Australia and Victoria missed this rain and continue to suffer from dryness, Meteorlogix said. There also is a chance for damaging frosts in southern wheat areas, the firm said.