By Jeff Wilson

BridgeNews Service

CHICAGO (B)--U.S. wheat futures did not close with much bullish enthusiasm Oct. 13 despite skepticism that rain forecast for the next several days will improve overall hard red winter wheat crop potential. But market bulls agree the weak technical finish was just another sign that once these markets start to accelerate, the pessimism may well turn into panic from end-users.

It is the wheat markets' history to try to leave as many participants on the sidelines as possible before major moves get rolling.

After the U.S. Department of Agriculture forecast the tightest world wheat carryover in 28 years Oct. 12, futures prices closed lower after opening higher on the news. Bearish price reaction to bullish fundamental news is never a good sign.

Chicago Board of Trade Dec. futures closed with an outside day down reversal pattern and fell again Oct. 13. The carryover selling Oct. 13 eventually pushed December to a close below last week's settlement and created a bearish weekly hook reversal down.

"Chicago continues to be the weakest of the three markets," said Paul Hare, technical analyst for the Linn Group in Chicago.

But he said CBOT December completed its first downside retracement objective during the retreat. The next downside objective is $2.63 1/4.

A close below the bottom of an upside gap created Sept. 29 at $2.61 1/2 could create new problems for the market.

In Kansas City Board of Trade wheat futures, the key to watch next week will be the $3.17-$3.15 area in December.

KCBOT December futures formed a spike high reversal Oct. 12 and dropped sharply Oct. 13. But prices still closed higher overall for the week.

"Only a close below $3.13 would hurt the overall bullish technical posture of this market," Hare said.

However, he said even if these support levels in CBOT and KCBOT wheat held next week, the next upside objectives for this current rally phase were just above this week's highs.

"There's not much more left to the current upside patterns," he said.

Tucker Emmett, a broker for ADM Investor Service in Chicago, said the whipsaw price action from the technical traders soon would be overwhelmed by the increasing fundamental supply problems shaping up for the U.S. wheat crop.

He thinks this market is just beginning a new bullish cycle. The 34-week cycle bottom set in late September means there still remains plenty of time for further gains in this new upward cycle.

But technical timing signals may have little bearing on the wheat market given the current picture developing on the fundamental front, Emmett said.

Based on USDA's world wheat carryover forecast of 111 million tonnes Oct. 12, that is the lowest absolute carryover in 28 years. But that carryover stated in the number of days of global usage is down to just 68 days.

"The current carryover picture is the tightest in moderate history," he said. "If we do not have a U.S. wheat crop next year, we could be looking at $7.50 wheat again," the 35-year veteran grain trader predicted. "The market acts as if it just does not care about a potential critical shortage of wheat next year."

David Kruse, president of CommStock Investments Inc. in Spencer, IA, agreed that the wheat market fundamental situation was as good as it had been in some time.

"I think it would take a hurricane in the Gulf of Mexico to pump up enough moisture into the southern Plains to seriously improve the soil moisture supplies," he said.

He predicted the wheat market would be back in a buying mood after people realized the forecast rains had little lasting impact on the hard red winter wheat crop.

Kruse thought the psychology of grain growers around the globe was becoming so pessimistic that the turnaround in grain prices signaled by the sharp USDA cuts in world wheat and coarse grain ending stocks already had begun.

The outlook for wheat prices will be further enhanced as future U.S. and foreign grain acreage outlooks confirm a major shift away from wheat and coarse grain plantings to soybeans.

A survey of U.S. farmers by Iowa State University this fall already indicated the pessimism in U.S. agriculture was growing.

"The pessimism is worse overseas, where farmers are not surviving with the same income supports that U.S. farmers have enjoyed from LDPs (loan deficiency payments) and other government support payments," Kruse said.

He said the drop in global grain acreage could be magnified this next year when farmers start to look at high fertilizer costs from the doubling of oil prices this year.

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