December 4, 2008
US Wheat Outlook on Thursday: Down on spillover, lack of bullish news
U.S. wheat futures are poised to slip at the start Thursday's day session on pressure from other markets and a lack of bullish news.
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 ended down 4 1/4 cents at US$5.15 1/2.
Strength in the U.S. dollar looms over wheat, as it gives foreign countries less buying power, a CBOT floor analyst said. Weakness in crude oil also is seen as a bearish influence for the grains, as ethanol is made from corn and funds often trade in a basket of commodities, he said.
Losses in crude oil and in neighboring CBOT corn and soybeans would add pressure to wheat, a trader said. Corn and soy are called to open modestly lower after falling overnight.
Fundamental news for wheat is not supportive, a trader said. Weekly U.S. wheat export sales of 207,600 tonnes were a marketing year-low, according to the U.S. Department of Agriculture.
The export sales were down 53% from the previous week and 47% from the prior four-week average, the USDA said. Analysts had been expecting sales of 350,000 to 550,000 tonnes.
In other export news, Morocco's state-owned wheat buyer announced a tender for 300,000 metric tonnes of soft milling wheat Thursday, European traders said. The closing date for bids is Dec. 17.
The U.S. has faced stiff competition for export business lately from the Black Sea region and Europe, an analyst said. There are ideas U.S. prices need to drop to make U.S. wheat more competitive, he said.
Statistics Canada, meanwhile, raised its estimate for 2008-09 all-wheat production to 28.611 million tonnes from its October estimate of 27.266 million. Traders had been expecting to see the crop get bigger, although the increase exceeded the high estimate of 28.4 million in a pre-report survey.
Ample supplies of wheat in the world continue to be a bearish influence on wheat markets, an analyst said. The world is expected to produce a record crop in 2008-09 due to expanded plantings and favorable weather.
Technical selling could weigh on wheat after a weak close Wednesday, Country Hedging said in a market comment. CBOT March wheat on Wednesday slid and finished near the session low.
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 Wednesday's high of US$5.34 and then at US$5.50. First support lies at US$5.15 1/4 and then at US$5.00.
"Wheat bears still have the overall near-term technical advantage," the technical analyst said.
In Australia, where rains at harvest are thought to have damaged wheat quality, there is a chance for mostly light to locally moderate showers through southeast areas Thursday, DTN Meteorlogix said in a forecast. Rainfall in the southeast is "of little concern" for cutting in the area, the private weather firm said.
Scattered thundershowers may develop in Australia's southern and central Queensland during the weekend, Meteorlogix said. The wheat harvest there "should be well along,' according to the firm.
In the U.S., periodic cold weather for Plains wheat belt does not look to be cold enough to harm wheat. However, periodic episodes of strong winds may need to be watched, Meteorlogix said.