November 12, 2008


US Wheat Outlook on Wednesday: Seen weaker on outside markets, overnight



U.S. wheat futures are poised to start Wednesday's day session lower on pressure from weak outside markets and a lack of follow-through buying from a late rally Tuesday.


Chicago Board of Trade December wheat is called to open 5 to 10 cents per bushel lower. In overnight electronic trading, CBOT December wheat ended down 6 1/2 cents at US$5.16 3/4.


Wheat pulled back overnight after closing higher Tuesday. Weakness in crude oil and strength in the U.S. dollar weighed on the grains overnight and should continue pressuring them into the day session, a CBOT floor analyst said. The grains also continue to eye the stock market.


"We've been trying a couple attempts at rallies and nothing's sticking," he said.


Crude oil is linked to the grains because funds often trade in a basket of commodities and because ethanol is made from corn. A stronger dollar gives foreign countries less buying power to import U.S. commodities.


Traders are waiting to see signs of export business after recent price setbacks, although demand has been sluggish lately, traders said. The U.S. Department of Agriculture's weekly export sales report will be released Friday, one day later than normal because of the Veterans Day holiday.


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, a technical analyst said. The bulls' next upside price objective is to push and close the contract above solid technical resistance at last week's high of US$5.87 3/4, he said.


First resistance is seen at Tuesday's high of US$5.26 and then at this week's high of US$5.36 1/4. First support lies at Tuesday's low of US$5.05 1/4 and then at US$5.00.


"A wide swinging wheat market is expected to continue, with support at US$5.00 and resistance at US$6.20" for CBOT December wheat, AgResource Company said in a research note. "We would trade the range."


Fundamental factors continue to take a back seat to influence from outside markets, traders said. The U.S. winter wheat crop is off to a good start, with soil moisture and temperatures favoring pre-winter growth in the central and southern Plains, according to weather service DTN Meteorlogix.


In other news, L'Office National Interprofessionnel des Grandes Cultures, or ONIGC, raised its estimate for soft wheat exports outside the European Union to 9 million tonnes, up from its October estimate of 8.5 million tonnes and from 4.9 million tonnes in 2007-08. The weaker euro is expected to boost the EU's competitiveness on the international market, and quality problems may hurt Ukraine's export program, ONIGC said.


The U.S. faces tough competition for export business as the world is expected to produce more wheat in 2008-09 than ever. Producers expanded plantings last year to take advantage of high prices after poor weather slashed output and drained supplies.

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