October 16, 2008

 

US Wheat Outlook on Thursday: Markets will continue to follow equities

 

 

U.S. wheat futures are poised to start slightly lower Thursday after slipping overnight, but the markets should rise if equities are trading higher as the grains open, traders said.

 

Chicago Board of Trade December wheat overnight fell 4 3/4 cents to US$5.51 per bushel.

 

Wheat could turn higher at the opening of trading because the grains continue to be "heavily influenced" by the stock market, a CBOT floor trader said. Grains are due for a technical rebound after tumbling Wednesday on pressure from sell-offs in the stock market and in crude oil, an analyst said.

 

Short-covering could help wheat rise if the outside and financial markets are firmer, an analyst said. Speculative funds remain net short at the CBOT.

 

CBOT December wheat on Wednesday set a fresh 16-month low of US$5.54 for a nearby contract. Paris wheat futures gapped lower overnight and hit an 18-month low on the second-month continuation chart.

 

There are some bearish ideas that demand will suffer due to a global economic slowdown, an analyst said. Some users are delaying purchases on expectations prices will fall further, he said.

 

But fundamentals continue to take a back seat to the outside markets, traders said. The U.S. Department of Agriculture is due to issue its weekly export sales report Friday, one day later than usual because of the Columbus Day holiday.

 

Japan said it bought 41,000 tonnes of wheat in a tender. The initial tender had been for 71,000 tonnes, but there were no successful bids for the remaining 30,000 tonnes, an official said, without elaborating.

 

In Ukraine, farmers held stocks of 14.8 million tonnes of grain as of Oct. 1, double the amount held a year ago, according to a government statistics committee. The stocks included 9.1 million tonnes of wheat, more than double the amount held a year ago, it said.

 

Production in Ukraine and worldwide is up this year from 2007-08 thanks to expanded plantings and mostly favorable growing weather. The world is expected to produce a record crop in 2008-09.

 

In Australia, where wheat areas have suffered from dryness, showers through New South Wales and Queensland during the weekend and early this week may favor filling wheat, DTN Meteorlogix said. However, it could be unfavorable for maturing wheat and the early harvest in the north, the private weather firm said.

 

In Argentina, recent rainfall has likely improved the condition of wheat, after a dry fall and winter. The next chance for showers appears to be early next week, although moisture is expected to hit northern crop areas more than the southern wheat belt, Meteorlogix said.

 

The next downside price objective for the bears is pushing and closing prices below major psychological support at US$5.00, a technical analyst said. Bulls' next upside price objective is to push and close the contract above major psychological resistance at US$6.00, he said.

 

First resistance is seen at Wednesday's high of US$5.79 3/4 and then at US$6.00. First support lies at Wednesday's low of US$5.54 and then at US$5.50.