November 19, 2008

 

US Wheat Outlook on Wednesday: Seen starting mixed in low volume trade

 

 

U.S. wheat futures are expected to start Wednesday's day session mixed amid an absence of fresh news and a lack of strong leadership from other markets.

 

In overnight electronic trading, Chicago Board of Trade December wheat finished unchanged at US$5.29 3/4 per bushel. CBOT March wheat ended unchanged at US$5.49 1/2.

 

Wheat should trade in a narrow range in thin volume as there isn't "a lot of excitement" in the markets, said Larry Glenn, broker and analyst for Frontier Ag. Trading volume on Tuesday also was lackluster.

 

Wheat could feel spillover support from gains in the neighboring CBOT corn and soybean markets, a trader said. However, the grains and soybeans could come under pressure if equities and crude oil are weaker at the start of trading, he said.

 

Crude oil and the U.S. dollar were weaker ahead of the grains opening. Oil is linked to the grains because ethanol is made from corn and because funds often trade in a basket of commodities. Weakness in the dollar is generally considered bullish for the grains because it gives foreign countries more buying power to import U.S. commodities.

 

"You've got some mixed signals," Glenn said about the outside markets.

 

Grains have been taking direction from the stock market and crude oil lately, as the credit crunch has prompted funds to pull money out of commodities. There are ideas the grains are divorcing themselves from the stock market, although Glenn said he didn't think they were "quite there yet."

 

CBOT December wheat Tuesday closed lower amid pressure from a stronger dollar, weaker crude oil prices and a weaker stock market, a technical analyst said. Wheat bears still have the overall near-term technical advantage, he 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 the November high of US$5.87 3/4, he said.

 

First resistance is seen at Tuesday's high of US$5.48 1/2 and then at last week's high of US$5.68 1/2. First support lies at this week's low of US$5.25 1/2 and then at last week's low of US$5.05 1/4 and then at US$5.00.

 

There is some chatter about dryness in the Southern Hemisphere. The lack of rain should be supportive to CBOT soybeans, which are being planted in Argentina and Brazil, and to wheat, which is being harvested in Argentina.

 

Private forecaster DTN Meteorlogix said Argentina will see mainly dry and warm-to-hot weather for the next 10 days. Stress to wheat will increase, the weather firm said.

 

Wheat also is being cut in Australia. Heavy rains and cooler conditions will likely mean harvest delays in New South Wales and possibly Queensland, Meteorlogix said.

 

In the U.S., weekend rains in southern Illinois and Ohio will help improve conditions for early growth of soft red winter wheat, Meteorlogix said. Soil moisture and temperatures in the central and southern Plains favor pre-winter growth of hard red winter wheat, except for areas in the southeast that may be too dry, the firm said.