November 21, 2008
US Wheat Outlook on Friday: Seen steady-higher on firm outside markets
Strong outside markets are expected to pull U.S. wheat futures higher Friday despite weakness in the grains overnight.
Chicago Board of Trade wheat is called to open steady to higher. In overnight electronic trading, CBOT December wheat dropped 3 3/4 cents to US$5.08, and March wheat slid 5 cents to US$5.26.
Gains in crude oil and equities, along with weakness in the U.S. dollar, should be supportive for the grains, traders said. Wheat will open higher as long as the outside markets remain strong until the opening of the grains session at 10:30 a.m. EST, a CBOT floor analyst said.
"I wouldn't be surprised if we're higher," said Vic Lespinasse, analyst for grainanalyst.com. "The outsides certainly point higher."
Grains have been taking their cue from activity in outside markets lately amid worries about the global economy. Recent sell-offs in equities and crude oil has pushed the grains to "artificially low prices," Lespinasse 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 softer U.S. dollar is seen as supportive for grains because it gives foreign countries more buying power to import commodities.
Export news was scarce, with Japan confirming it bought 91,000 tonnes of U.S. wheat in a routine tender concluded Thursday. Otherwise, there wasn't much fresh fundamental news for the markets to digest.
Soil moisture and temperatures continue to favor pre-winter growth of wheat in the U.S. central and southern Plains, except that it may be too dry through southeastern areas, private weather firm DTN Meteorlogix said. In Europe, stormy weather, strong winds and colder weather during the next few days could delay any late winter crop planting, the firm said.
An unusual late spring storm along the southeast coast of Australia will bring strong winds, some rain and "very cool temperatures" to parts of Victoria and southeast New South Wales during the next two days, Meteorlogix said. The event may "impact some wheat areas and is unfavorable for maturing wheat and wheat harvests in the area, the firm said. December options expire Friday. Open interest is thin in US$5 CBOT wheat calls, but "there is significant volume in the US$5 put as December futures again flirts with the US$5 level," according to Farm Futures.
The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at the contract low of US$5.18, a technical analyst said. Bulls' next upside price objective is to push and close December futures prices above solid technical resistance at this week's high of US$5.87, he said.
First resistance is seen at Thursday's high of US$5.44 and then at US$5.50. First support lies at Thursday's low of US$5.20 and then at the contract low of US$5.18 and then at US$5.00.