December 22, 2008

 

US Wheat Outlook on Monday: Mixed in low-volume, pre-holiday trade

 

 

U.S. wheat futures are expected to open to a mixed trade, low-volume Monday.

 

Chicago Board of Trade March wheat is called to open down 1 to 3 cents per bushel, in line with overnight losses.

 

In overnight electronic trading, CBOT March wheat lost 1 1/2 cents to US$5.61 3/4. Kansas City March wheat gained 1/2 cent to US$5.83 1/2 and Minneapolis Grain Exchange wheat added 3 3/4 cents to US$6.29.

 

Stronger crude oil and a weaker dollar add support. Speculative funds were net sellers Friday as U.S. wheat came under pressure from a powerful U.S. dollar rally. Funds are still short an estimated 16,000 contracts at the CBOT.

 

Despite softness Friday, for the week nearby March CBOT gained 50.25 cents to US$5.6325, March KCBT wheat rose 44.75 cents to US$5.83 a bushel, and MGE gained 35.25 cents to US$6.2525. "Wheat managed to push through modest overhead chart resistance last week, largely due to the greater pressure to cover short positions in Chicago," said Arlan Suderman, a market analyst with Farm Futures.

 

"Even so, Kansas City saw open interest trend steadily higher over the past two weeks, with traders increasingly concerned about tight quality milling stocks ahead of the 2009 harvest. Arctic cold over many parts of the Plains lacking sufficient snow cover raised concerns about the size of the 2009 crop as well, although we won't know if any significant damage occurred for several months."

 

While bears maintain "the overall near-term technical advantage, the bulls have gained momentum," a market technician said.

 

Wheat bears are aiming close below last week's low at US$5.15," he said, marking first support at Friday's low of US$5.58, then at US$5.50.

 

Wheat bulls gun to pierce solid technical resistance at US$5.78, the technician said. He set first resistance at Friday's high of US$5.70, then last week's high of US$5.75 1/2.

 

Episodes of subzero temperatures through the northern sections of the [hard red winter wheat] belt should not be damaging as the crop is well established," said DTN Meteorologix.

 

Still isolated winterkill reports continue.

 

"Very cold temperatures may have resulted in additional scattered winterkill across central and western Nebraska and northeast Kansas this morning," Suderman said. "Snow cover in eastern Nebraska likely prevented winterkill there."

 

Mostly dry conditions are speeding the harvest of Argentina's drought-stressed crop, which is now ahead of last year's pace, Meteorologix said.

 

In Australia, wet conditions continue to create an "unfavorable" environment for maturing wheat and "will likely delay the wheat harvest," the private weather firm said.

 

In global trading news, the European Union looks increasingly unlikely to meet its wheat export target of 17 to 18 million metric tonnes, thanks largely to an abundance of cheaper Russian wheat.

 

The E.U. has already exported three times as much wheat as it did in the entire previous marketing year, which ran from July 2007 to June 2008, but it remains 6 to 7 million tonnes short of its goal.

 

Brokers estimate Black Sea wheat costs about US$15/tonne less than E.U. wheat.

 

China's wheat prices in major producing areas were higher in the week to Monday, supported by strong demand ahead of the year-end holidays.

 

The country continues to refrain from imports during the current marketing year.