November 14, 2008


US Wheat Outlook on Friday: 3-5 cents up, eying outside markets, Argentina



U.S. wheat futures are expected to start Friday's day session higher on follow-through buying from the overnight and short-covering.


Chicago Board of Trade December wheat is called to open 3 to 5 cents per bushel higher, although weakening outside markets could temper gains. In overnight electronic trading, CBOT December wheat ended up 4 3/4 cents at US$5.43.


Grains were higher overnight following a late rally Thursday in the stock market. Wheat will continue to take cues from the neighboring corn and soy markets and from the outside markets, such as stocks and crude oil, traders said.


Still, CBOT December wheat should continue to trade in the broad range from just above US$5 to around US$5.70, a CBOT trader said. Price swings within the range can be big and fast in thin volume, he said.


Traders will be keeping an eye on conditions in Argentina during the next month or so, following the Rosario Cereals Exchange's report that the 2008-09 wheat harvest could be the smallest in more than a decade due to drought and reduced plantings, a trader said. Wheat production could total between 9.5 million and 10.5 million metric tonnes, down from 16.3 million tonnes last year, according to the exchange.


The weather trend toward below-normal rain and above-normal temperatures in Argentina is set to continue, increasing stress to wheat, according to weather firm DTN Meteorlogix. The U.S. Department of Agriculture on Monday lowered its estimate for Argentina's crop to 11 million tonnes from its October estimate of 12 million.


Argentina is a major wheat producer in the world and a major exporter. Reduced production or quality in Argentina could mean more export business for the U.S., a trader said.


Overall weekly U.S. wheat export sales were 253,300 tonnes, including sales for the 2008-09 and 2009-10 marketing years, according to the USDA. That was near the low end of analysts' estimates, which ranged from 200,000 tonnes to 400,000 tonnes.


Export sales for the 2008-09 year were 248,300 tonnes, down 32% from the previous week and 40% from the prior four-week average, the USDA said. Of the total, sales of soft red winter wheat were 115,100 tonnes, and sales of hard red winter wheat were 82,900 tonnes.


Precipitation through the southern and eastern U.S. Midwest on Friday and Saturday should help improve soil moisture in SRW wheat areas that have been too dry, Meteorlogix said. Soil moisture and temperatures in HRW wheat areas of the central and southern Plains favor early growth, the weather firm said.


In Australia, wheat ranges from the late filling stage of development to harvest. Rainfall early next week in the eastern wheat belt may cause harvest delays but they should not be major disruptions, Meteorlogix 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, a technical analyst said. 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.


First resistance is seen at US$5.55 and then at Thursday's high of US$5.68 1/2. First support lies at Thursday's low of US$5.21 1/4 and then at this week's low of US$5.05 1/4 and then at US$5.00.

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