October 13, 2009

 

US Wheat Outlook on Tuesday: Seen up slightly; eyeing corn, soybeans

 

 

U.S. wheat futures are expected to start slightly higher Tuesday on follow-through buying, but the markets lack fundamental support and will likely keep an eye on the neighboring row crops, traders said.

 

Chicago Board of Trade December wheat is called to start up 2 to 3 cents per bushel. In overnight electronic trading, CBOT December wheat edged up 1 3/4 cents to US$4.96.

 

Wheat should take direction from neighboring CBOT corn and soybeans during the day session amid a lack of fresh fundamentals news, traders said. The row crops pushed up U.S. wheat Tuesday as they rallied on technical buying and worries that poor weather will continue to delay the U.S. harvest.

 

Soybeans were higher overnight, while corn dipped. A lower U.S. dollar could bring buying interest into the grains, according to Midwest Market Solutions, because a soft dollar makes U.S. grain more attractive to foreign buyers.

 

"Look for wheat to be a follower today," Country Hedging said Tuesday in a market comment."

 

Speculative funds continue to hold a large net short position in CBOT wheat, but wheat lacks the bullish fundamentals to support a rally. World supplies are considered comfortable, while export demand has been lackluster due to competition from other countries.

 

Japan is seeking 132,000 tonnes of wheat, including 90,000 from the U.S., in a routine tender that was issued Tuesday and will be concluded later in the day, an agriculture ministry official said.

 

"On its own wheat should struggle under the weight of ample world supplies," Benson Quinn Commodities said in a note. "Funds are still short in Chicago and continued short covering will remain supportive. Harvest delays for corn and soybeans could also provide support but wheat lacks a story of its own."

 

The U.S. Department of Agriculture is slated to issue its weekly U.S. export inspections data at 11 a.m. EDT. It's expected to release a weekly crop progress report, which will include an update on U.S. winter wheat seeding, at 4 p.m. EDT.

 

Showers will mostly favor germination and early growth of hard red winter wheat in the central and southern Plains but may slow planting progress, according to DTN Meteorlogix. Cold temperatures slow germination and emergence and may burn back some emerged wheat in the north, but temperatures could rise later this week, the private firm said.

 

Wheat production in Australia's New South Wales could fall to as low as 4 million metric tonnes due to dry weather, a government official said. Still, there is plenty of wheat to go around, and Australia's total crop is expected to top 20 million tonnes, traders said.

 

In Argentina, beneficial rain and thunderstorms hit major wheat areas in southeast Cordoba, Sante Fe, central and east Buenos Aires during the weekend, Meteorlogix said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$4.60, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.25, he said.

 

First resistance is seen at Monday's high of US$4.96 1/2 and then at US$5.00. First support lies at US$4.83 and then at US$4.75.