U.S. wheat futures are expected to extend their losses when pit trading opens Wednesday, as overnight weakness in equities futures and crude oil atop a strengthening dollar promises to pressure.
Chicago Board of Trade December wheat is called to open 10 to 12 cents per bushel lower. In overnight electronic trading, CBOT December wheat dropped 12 cents to USUS$5.37.
Traders are watching for the results of an Egyptian wheat tender, which should be announced Wednesday morning, to provide a glimmer of bullish sentiment.
"We're becoming somewhat competitive; it's just a numbers game at this point and no one's in a hurry to buy," a CBOT floor trader said.
"We're expecting to be followers of outside markets today. I'm not seeing anything fresh," he added, noting trading volume has been and should continue to be light in Chicago.
As the dollar strengthens against the euro and the sterling, France's wheat also is becoming more competitive. European wheat futures traded higher based on the currency moves, but a London-based broker also noted that the strengthening dollar is pressing U.S. grain prices down.
"Wheat simply doesn't have a friend in the commodity markets at this time, with traders focused on fears that a slowing global economy will reduce demand for wheat," said Arlan Suderman, said Farm Futures market analyst. "The relationship is somewhat weaker for the food grain, but psychology can be a powerful force in the commodity world.
"U.S. prices are very competitive on the world market following recent losses, which should strengthen demand, but traders are worried that Argentina and Australia will steal increasingly large shares of our business as harvest begins in the Southern Hemisphere," Suderman added.
To tighten their grip over the trading trends, wheat bears must close CBOT December wheat below solid technical support at last week's low of USUS$5.43, which is also seen as Wednesday's first support level, a technical analyst said.
The stronger U.S. dollar and sharply lower crude prices helped press nearby CBOT wheat to a 17-month low closing price Tuesday, the analyst said.
Wheat bulls must close above "major psychological resistance" at USUS$6 a bushel, with first resistance seen at Tuesday's high of USUS$5.71 1/2, then at the week's high of USUS$5.79.
"By no means do we feel seasonal bottoms have been scored," said MF Global's hard red wheat team. "But, we also feel that we are within sight of those bottoms."
MF Global is watching London Interbank Offered Rate, ocean shipping rates and the quality and quantity of the Southern Hemisphere crops; when two of these three indicators turns bullish, "then the time has come to try to pick bottoms," MF Global said.
The Plains states should experience rain and possibly mix with snow in the north and northwestern areas of the central Plains states, while the rest of region stays mostly dry aside from a few light showers, DTN Meteorlogix said. Temperatures should range from 22-63 degrees Fahrenheit, according to DTN.
The rain, which is moving into the western Midwest Wednesday, should benefit planting and development efforts, the private weather forecasting firm said.
The rain is generally beneficial to wheat planting efforts, DTN said, noting that some Midwestern areas are still too dry.
The CBOT trader said he'll be watching to see how the cold, snowy weather treats newly emerged wheat.
India's 2008-09 wheat output may exceed the government's target of 78.5 million metric tons as late monsoon rains and an increase in state-set procurement prices will encourage farmers to grow more wheat this year.
Industry officials and analysts said they expect output to hit 80 million tons, up 2% rise from an estimated 78.4 million tons produced in 2007-08.
India's wheat stocks have already risen to 22.03 million tons as of Oct. 1 from just 7.7 million tons in January. Under current norms, the country needs to keep a minimum buffer stock of 11 million tons.