December 8, 2008
US Wheat Outlook on Monday: Expected to rebound on outside support
U.S. wheat futures are poised to start Monday's day session higher in a rebound from sharp losses last week and on support from firm outside markets.
Chicago Board of Trade March wheat is called to open 10 to 20 cents per bushel higher. In overnight electronic trading, CBOT March wheat jumped 16 1/2 cents to US$4.92.
The markets are due for a recovery after CBOT March wheat last week ended down 85 3/4 cents for the week, traders said. Losses in outside markets, including crude oil and equities, pressured wheat last week.
However, expected gains in crude oil Monday are seen as supportive to the rebound in the grains, traders said. Crude oil is linked to the grains because funds often trade in a basket of commodities and because ethanol is made from corn.
Weakness in the U.S. dollar also should give U.S. wheat a boost, an analyst said. A cheap dollar makes U.S. grains more attractive to foreign buyers.
"It seems to be macro-driven," a CBOT floor trader said about the grains trade.
Non-commercial speculative funds increased short CBOT wheat futures and options positions by 8,456 contracts, leaving them net short 34,683 contracts as of Dec. 2, the Commodity Futures Trading Commission said in a supplemental Commitments of Traders report. Index traders increased long CBOT wheat positions by 3,285 contracts and were net long 130,824 contracts.
The speculative funds' large net short position in CBOT wheat is "supportive" to the market because it opens the door for short-covering rallies, a CBOT trader said.
The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at US$4.50, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$5.20, he said.
First resistance is seen at Friday's high of US$4.86 1/2 and then at US$5.00. First support lies at Friday's contract low of US$4.71 and then at US$4.50.
There continues to be chatter about quality downgrades in Australia's wheat crop due to rains at harvest time. Weekend showers that hit northern New South Wales and Queensland will cause delays to any late wheat harvesting, private weather firm DTN Meteorlogix said.
"Showers or rain develop through western and southern wheat areas during this week," Meteorlogix said. "This means additional harvest concerns."