December 3, 2009

 

US Wheat Outlook on Thursday: Seen up on overnight, but Egypt snubs us

 

 

U.S. wheat futures are expected to start stronger Thursday after rising overnight, although fundamentals remain weak and Egypt booked wheat from other origins.

 

Chicago Board of Trade March wheat is called to start 3 to 5 cents per bushel higher. In overnight electronic trading, CBOT March wheat jumped 5 cents to US$5.81.

 

Expected gains in neighboring CBOT corn and soybeans and strength in gold and crude oil prices should help lift wheat, traders said. The markets are related because funds often trade in a basket of commodities.

 

Speculative money flows have been the driver of the wheat markets lately and will continue to take the lead, an analyst said. Supply and demand factors don't justify prices being as high as they are, he said.

 

Wheat is "probably just the biggest example of a market just trading whatever the money flow does," the analyst said.

 

World wheat supplies are considered large, and export demand for U.S. wheat has been lackluster owing to competition from other countries. Egypt, a major buyer on the world market, on Thursday bought 240,000 tonnes of Russian and German wheat in a tender and none from the U.S.

 

U.S. wheat is considered too high priced to be competitive on the global market. Egypt, known for being a price-conscious buyer, has snubbed the U.S. in several tenders in a row.

 

Weekly U.S. wheat export sales of 390,700 tonnes were within trade expectations of 300,000 tonnes to 500,000 tonnes. The sales were up 11% from the previous week and from the prior four-week average, according to the U.S. Department of Agriculture.

 

Japan, meanwhile, said it bought 145,000 tonnes of wheat, including 105,000 tonnes from the U.S., in a routine tender issued Tuesday and concluded Thursday

 

In other news, a larger-than-expected estimate of all-wheat production from Statistics Canada won't have a major impact on U.S. wheat futures because the market isn't trading fundamentals, an analyst said. Statistics Canada pegged production at 26.515 million tonnes, up from its September estimate of 24.58 million and above trade estimates of 24.9 to 25.5 million.

 

"Fundamentally, you'd have trouble arguing to support wheat at US$5 even," an analyst said.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at last week's low of US$5.52, a 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$6.04 3/4, he said.

 

First resistance is seen at Wednesday's high of US$5.86 1/2 and then at US$5.93. First support lies at Wednesday's low of US$5.70 1/2 and then at US$5.60.