November 25, 2008


US Wheat Outlook on Tuesday: 3-5 cents lower, watching outside markets



U.S. wheat futures are poised to start a few cents lower Tuesday on weaker outside markets, although a rise in crude oil and equities would help stabilize the grains.


Chicago Board of Trade March wheat is called to open 3 cents to 5 cents per bushel lower. In overnight electronic trading, CBOT March wheat dropped 4 1/2 cents to US$5.52 1/4.


Grains will continue to watch crude oil and equities for direction amid jitters about the global economy. Crude oil was weaker but "well off its lows" ahead of the grains opening, encouraging ideas that wheat could see a two-sided trade if energies firm up, a CBOT floor trader said.


Weakness in the neighboring CBOT corn and soy markets would add pressure on wheat, traders said. Strength in the U.S. dollar is bearish for the grains as it gives foreign countries less buying power to import commodities.


CBOT wheat continues to be stuck in a sideways trend of roughly US$5 to US$5.85, AgResource Co. said in a note. A sharp decline in the U.S. dollar could help the market break out to the upside by attracting export business, an analyst said.


Japan said it won't hold its weekly wheat import tender this week but did not explain why. The news is "no big deal" because Japan is a reliable buyer and will eventually return to the market, a trader said.


Jordan said it was tendering to buy 100,000 metric tonnes of wheat of any origin, on a cost and freight basis. The government is looking to buy 50,000 tonnes for shipment during the first half of March and 50,000 tonnes for shipment during the second half of March, an official said.


Argentina, meanwhile, said it still has 1.78 million metric tonnes of wheat available for export from the 2007-08 crop and that the grain will be cleared for export. Argentina's 2008-09 crop is struggling due to dry weather.


In other news, wheat harvest is gathering pace in Western Australia, according to Cooperative Bulk Handling Ltd., which owns that state's upcountry grain storage and export network. Rainfall has slowed the harvest in some areas, with concerns emerging in some southern areas about grain quality, CBH reported.


Additional rains appear likely to hit Australia's eastern crop belt later this week, DTN Meteorlogix said in a forecast. The moisture will "further delay the already delayed wheat harvest and it will also increase the risk for disease," the private weather firm said.


In the U.S., precipitation in the eastern and southern Midwest favors soft red winter wheat development, Meteorlogix said. The U.S. Department of Agriculture rated 65% of U.S. winter wheat as good to excellent as of Sunday, down one percentage point from the previous week but within trade expectations.


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$5.15 1/4, a technical analyst said. Bulls' next upside price objective is to push and close the contract prices above solid technical resistance at the November high of US$6.08, he said.


First resistance is seen at Monday's high of US$5.78 and then at US$5.88 3/4. First support lies at US$5.50 and then at US$5.40.

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