November 7, 2008

 

US Wheat Outlook on Friday: Seen mixed, watching outside markets

 

 

U.S. wheat futures are expected to start Friday's day session mixed, with the grain's direction still linked to activity in outside markets.

 

In overnight electronic trading, Chicago Board of Trade December wheat added 4 3/4 cents to US$5.27 1/4 per bushel. CBOT March was up 4 cents at US$5.47 1/4.

 

U.S. stock futures and crude oil were see-sawing after the U.S. Labor Department said nonfarm payrolls tumbled a larger-than-expected 240,000 in October. A deep slide in the outside markets will weigh on U.S. grains, a CBOT floor analyst said.

 

"Crop prices remained joined to the hip with the stock market, which could make for another volatile day of trading to end the week," said Bryce Knorr, senior editor for Farm Futures.

 

Wheat could see position-evening ahead of crop reports due out at 8:30 a.m., EST, Monday from the U.S. Department of Agriculture. Positioning will especially become a factor if the outside markets trade near unchanged, the CBOT floor analyst said.

 

The crop reports will include updated 2008-09 carryout estimates for U.S. wheat, corn and soybeans. They will also include fresh production and yield estimates for corn and soybeans.

 

The average of analysts' estimates for U.S. wheat carryout in 2008-2009 is 594 million bushels, down from the USDA's October estimate of 601 million, according to a Dow Jones Newswires survey of 12 analysts. Solid export demand and feed use could prompt the USDA to trim carryout, analysts said.

 

There is a lack of other fundamentals news for the wheat markets to digest, traders said. The U.S. remains uncompetitive in the world wheat export market because prices are too high, a CBOT floor broker said.

 

Forecasts of rain Friday and during the weekend left Australia's wheat crop on weather watch, with traders worried about deteriorating quality in case of widespread rain at harvest time. A trough and cold front were forecast to bring widespread rain and storms to South Australia, Victoria and western New South Wales Friday.

 

Rain just before harvest can reduce milling quality wheat to feed quality. A poor quality Australian crop could potentially be a boost to U.S. exports, as the U.S. has a fairly high-quality crop, a broker said

 

CBOT December wheat Thursday closed near the session low on pressure from weak outside markets. Wheat bears have the overall near-term technical advantage and have regained downside momentum, a technical analyst said.

 

The next downside price objective for the bears is pushing and closing CBOT December wheat below solid technical support at the October low of US$4.96 1/2, the technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at this week's high of US$5.87 3/4, he said.

 

First resistance is seen at Thursday's high of US$5.39 1/2 and then at US$5.50. First support lies at Thursday's low of US$5.13 1/2 and then at US$5.00.