December 12, 2008

 

US Wheat Outlook on Friday: Down 8-11 cents on weak outside markets

 

 

U.S. wheat futures are poised to open lower following overnight losses and weakness in outside markets.

 

Chicago Board of Trade wheat is called 8 to 11 cents lower. In overnight trading, December wheat was down 12 cents to US$4.79 1/4 a bushel, March wheat was down 11 1/4 cents to US$4.96 and May wheat was down 12 cents to US$5.08 3/4.

 

Sharply lower energy prices could set a bearish tone for the grains markets, analysts said.

 

"It looks kind of ugly here this morning," said Chad Henderson, analyst for Prime Ag Consultants, noting crude oil has broken sharply.

 

But traders and analysts also noted the dollar was weaker, which typically supports commodities because it makes exports more attractive.

 

Henderson said the CBOT March contract as of Thursday's close was 32 cents higher on the week, and that it could lose 15 cents Friday without discouraging market bulls.

 

"I think as long as you have a higher weekly close you're going to have the bull traders in the market say 'look, we're putting the seasonal low in,' " Henderson said.

 

But wheat market bulls should be worried because the market didn't climb Thursday despite sharply higher crude oil and a sharply lower dollar, a technical analyst said.

 

The next downside price objective is to push and close March prices below solid technical support at last week's contract low of US$4.71, the technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at US$5.25.

 

First resistance is seen at Thursday's high of US$5.17 and then at US$5.20. Support lies at US$4.88.

 

Country Hedging said that "scattered rain events continue in parts of Australia through the weekend, increasing quality concerns." It also said export demand could pick up next week, with Morocco, Jordan, Pakistan and Syria all expected to be looking for wheat.