December 30, 2008

US Wheat Outlook on Tuesday: Markets seen up, but could trade sideways

Spillover strength from expected gains in neighboring markets should boost U.S. wheat futures at the start of Tuesday's day session, although trading could turn two sided.

Chicago Board of Trade March wheat is called to open 2 to 4 cents per bushel higher. In overnight electronic trading, CBOT March wheat rose 3 3/4 cents to US$5.95 3/4.

Wheat could feel some early support from CBOT corn and soybeans, which were higher overnight, traders said. Volume is expected to remain low, as the markets are still in "holiday mode," they said.

Wheat could trade both sides as the markets' upside momentum is waning a bit after a rally this month, a CBOT floor trader said. CBOT March wheat has climbed more than US$1 this month since hitting a low of US$4.71 in the open outcry trading on Dec. 5.

CBOT March wheat on Monday closed lower and near session lows on profit-taking as prices consolidated some of this month's rally. If the contract extends the rally, an Oct. 6 gap crossing at US$6.60 is the next upside target, a technical analyst said. Closes below the 20-day moving average near US$5.36 would temper the near-term friendly outlook in the market, he said.

Non-commercial speculative funds were net short 23,444 contracts in CBOT wheat as of Dec. 22, the Commodity Futures Trading Commission said in a supplemental Commitments of Traders report. The speculators' short position helps provide underlying support to the market, a trader said.

There is not much fresh fundamental news out about wheat, traders said. India's food ministry has cleared a proposal for export of 600,000 metric tonnes wheat to Afghanistan, which would be the country's biggest overseas sale after the government eased an export ban last month, a senior government official said.

The wheat harvest in Eastern Australia has slowed, but the pace of exports from east coast ports remains well up from last year's drought-reduced levels, according to logistics provider GrainCorp Ltd. (GNC.AU). Cutting "is basically starting to wrap up in a lot of areas" in New South Wales, but further grain will be received as the harvest continues in Victoria state, a company official said.

In the U.S., there are no significant cold weather threats for hard red winter wheat on the central and southern Plains during the next seven days, DTN Meteorlogix said in a forecast. There are no significant cold weather threats for the soft red winter wheat in the Midwest during the next 10 days, the private weather firm said.