December 3, 2008


US Wheat Outlook on Wednesday: Slightly down after slipping overnight



U.S. wheat futures are expected to start Wednesday's day session a shade lower after slipping overnight, although the markets could trade both sides in choppy activity.


Chicago Board of Trade March wheat is called to open 1 to 2 cents per bushel lower. In overnight electronic trading, CBOT March wheat shed 2 cents to US$5.26 1/2.


Wheat will continue to keep an eye on outside markets, including equities and energies, for direction, traders said. Strength in the U.S. dollar is seen as a bearish influence on the grains because it makes U.S. commodities less attractive to foreign buyers.


There are some concerns about "light demand" for U.S. wheat, Country Hedging said in a market comment. The U.S has recently been bypassed in tenders from Egypt and Iraq.


Egypt on Tuesday said it bought Russian and French wheat in a tender but none from the U.S.


Competition from the Black Sea region, in particular, has been tough lately, with Russia making aggressive moves to sell its wheat.


Russia exported 9.994 million tonnes of grain, including 8.921 million tonnes of wheat, from the beginning of the marketing year July 1 to Nov. 25. That's about double the amount exported a year earlier.


In other news, Syria's state-owned General Authority for Cereal Processing and Trade, or Hoboob, said it had postponed the closing date for a tender to buy 200,000 metric tonnes of soft wheat from Dec. 1 to Dec. 17.


There continues to be market chatter that quality downgrades to Australia's crop could shift some demand to the U.S., an analyst said. Rains at harvest time have damaged wheat in areas, with cutting running about a month behind schedule in the New South Wales state, according to GrainCorp Ltd. (GNC.AU).


A "fast-moving disturbance" may bring some shower activity to Australia's southeast crop belt through Thursday, private weather firm DTN Meteorlogix said in a forecast. Harvest delays are possible, but "major" delays are not expected, the firm said.

Market participants generally still have the feeling that there is a lot of wheat to go around in the world, a trader said. The world is expected to produce more wheat in 2008-09 than ever before thanks to expanded seedings and favorable weather, although much of the extra supply is feed-quality.


Statistics Canada on Thursday will issue an update to its 2008-09 all-wheat production forecast. Trade estimates range from 25.5 million tonnes to 28.4 million, compared to Statistics Canada's October estimate of 27.266 million.


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 above solid technical resistance at US$5.65 1/4, he said.


First resistance is seen at Tuesday's high of US$5.38 and then at US$5.50. First support lies at this week's low of US$5.22 and then at US$5.15 1/4.

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