October 13, 2008

 

US Wheat Outlook on Monday: 10-15 cents higher on rebound, export demand

 

 

U.S. wheat futures are poised to start Monday's day session higher in a bounce from recent losses supported by export demand.

 

Chicago Board of Trade December wheat is called to open 10 cents to 15 cents per bushel higher. In overnight electronic trading, CBOT December wheat rose 16 cents to US$5.79 1/2 per bushel.

 

Wheat is due for a rebound as recent sell-offs in the markets were overdone, a CBOT floor broker said. Commodities tumbled last week on turmoil in global financial markets, but the world seems to be stabilizing a bit more amid strength in stocks, he said.

 

The outside crude oil market is firmer, which is seen as supportive for the grains as funds often trade in a basket of commodities, a trader said. Weakness in the U.S. dollar should give wheat an extra boost, as a cheap greenback gives foreign countries more buying power.

 

Demand for wheat is supportive, with Egypt's state-owned wheat buyer, the General Authority for Supply Commodities, buying 265,000 metric tonnes of U.S. soft red wheat and Russian wheat in a tender, a trader said. Of the total, 120,000 tonnes were U.S. wheat.

 

U.S wheat seems to be finding good value at current price levels, a trader said. In other export news, Jordan said it was looking to buy 100,000 metric tonnes of wheat, of any origin, on a cost and freight basis.

 

CBOT December wheat on Friday hit a day session low of US$5.58, the lowest price for a nearby contract on a monthly continuation chart since June 2007. There is "bold gap resistance" at US$6.

 

FuturesTechs said in a market comment that it will "remain firmly with the bears all the time US$6.00 is holding firm above" the market.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at US$5.50, a technical analyst said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at US$6.50, he said.

 

First resistance is seen at the overnight high of US$5.84 1/2 and then at US$6.00. First support lies at the overnight low of US$5.65 1/4 and then at last week's low of US$5.57 3/4.

 

In other news, Rabobank Australia lowered its production forecast for Australia's wheat crop to 20.5 million from its estimate of 21 million last month. The reduction should not cause big waves at the CBOT because trade estimates generally range from 20 million to 23 million tonnes, a trader said.

 

Dry conditions in South Australia and western Victoria look to continue in the near term, DTN Meteorlogix said in a forecast. There continues to be talk of damage to the wheat crop in West Australia due to a late September frost, the private weather firm said.