October 30, 2009

 

US Wheat Outlook on Friday: Lower on firm dollar, lack of demand

 

 

U.S. wheat futures are expected to slip on Friday's open, giving back some of Thursday's gains as outside markets drag prices lower.

 

Chicago Board of Trade wheat is called 3 to 5 cents lower. In overnight trading, December CBOT wheat was down 4 1/4 cents to US$4.99 1/2 per bushel and March wheat was down 3 cents to US$5.20 1/4.

 

Price action in wheat, along with other grains and oilseeds, continues to be set by outside markets, particularly the dollar, which is firm Friday morning and could weigh.

 

Wheat and the neighboring corn and soybean markets are poised for a retreat following Thursday gains. Traders said there was little fundamental support for the gains, particularly with weak weekly export sales reported Thursday.

 

"The feed grains, in particular the wheat, did not get a good export sale number yesterday," said Mike Zuzolo, president of Global Commodity Analytics and Consulting. "The market may come around and revisit those numbers, because they don't have the outside market support, and the weather, as much as they did yesterday."

 

The weather has been a focus of the market as soft red winter wheat planting gets delayed by recent soggy weather in the nation's mid-section.

 

"We are still fascinated by what is happening to the soft red winter wheat nonplanting that is going on in the SRW production area that is primarily from Illinois in the west to Ohio in the east," Dennis Gartman wrote in Friday's Gartman Letter. "Rain and lots of it is keeping farmers there from getting into the fields to harvest their soybean crops, behind which they plant soft red winter wheat."

 

But Zuzolo said those concerns might have been priced in to the market already during the recent CBOT surge.

 

"I think now you're probably going to see a lot more spread trading where they sell the Dec and March, but buy the new crop July," Zuzolo said.

 

Traders keeping an eye on crops in the southern hemisphere say there are few problems that could rally the market near term.

 

The next downside price objective for the bears is pushing and closing prices below solid technical support at US$4.80, a technical analyst said. The next upside price objective is to push and close December CBOT futures prices above solid technical resistance at US$5.29 a bushel.

 

First resistance is seen at Thursday's high of US$5.11 1/4 and then at US$5.20, the technical analyst said. First support lies at US$5.00 and then at this week's low of US$4.91 1/4.