December 11, 2008


US Wheat Outlook on Thursday: Seen lower after USDA report



U.S. wheat futures are expected to start lower Thursday on bearish increases in U.S. grain ending stocks, although weakness in the U.S. dollar and strong outside markets could temper losses, analysts said.


Chicago Board of Trade March wheat is called to open 5 to 10 cents per bushel lower. In overnight electronic trading, CBOT March wheat ended unchanged at US$5.09 1/2.


The U.S. Department of Agriculture, in its December supply and demand report, pegged 2008-09 U.S. wheat carryout at 623 million bushels, up from its November estimates of 603 million. The new projection was above the average analyst estimate of 596 million in a pre-report survey and above the highest analyst estimate of 606 million.


It also was bearish that USDA increased its forecast for corn ending stocks, traders said. The agency put corn carryout at 1.474 billion bushels, compared to its November estimate of 1.124 billion and the average analyst estimate of 1.232 billion.


The report "just takes us away from the rally we had, especially in wheat, where we were very close to the upside resistance," said Louise Gartner, analyst for Spectrum Commodities. "It certainly could be a reason to stall out this rally. Now the dollar being sharply lower could offset that somewhat."


The grains have been taking direction lately from outside markets like crude oil and from the U.S. dollar. A weak dollar makes U.S. commodities more attractive to foreign buyers.


Crude oil, which was climbing ahead of the Thursday's grains opening, is linked to the grains because funds often trade in a basket of commodities and because ethanol is made from corn. The grains could "quickly turn back to what outside markets are doing," said Farm Futures analyst Arlan Suderman.


Activity in the grains Thursday will be "important" following rallies Wednesday, Gartner said.


"If the market reacts lower and really falls back, we're going to resume the downtrend," Gartner said. "If it can fight off this kind of negative report, then it has got some legs under it."


The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at last week's contract low of US$4.71, 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 Wednesday's high of US$5.11 3/4 and then at US$5.20. First support lies at US$5.00 and then at Wednesday's low of US$4.88.


In other news, weekly U.S. wheat export sales of 239,300 tonnes were within analysts' expectations, which ranged from 200,000 to 350,000 tonnes. Still, the export sales were "pretty disappointing" after weak sales last week, an analyst said.

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