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NEAR-TERM MARKET FUNDAMENTALS: The wheat market sold off overnight in conjunction with a stronger dollar. This continued the recent acceleration to the downside by wheat which traders are blaming on a firmer dollar and weak demand for US wheat as well as a softer tone in commodity markets in general. This is a turn around for the wheat market which was the leader to the upside among grain markets during the index funds’ ‘rebalancing’ period at the start of the year and into last week. Now, wheat has become the leader to the down side. One analyst noted that open interest in wheat futures has continued to move higher during the downturn and he suggested that this may be the result of fresh selling by trend-following or managed funds who have been rebuilding their net short position in recent weeks. This week’s export inspections in wheat added to the negative demand picture. They came in well below trade expectations at 9.4 million bushels which was down from over 12 million bushels last week. Total inspections to date stand at 61.9% of the USDA’s projected total for the marketing year versus a 5-year average of 64.2%. Inspections need to average 15.9 million bushels each week to reach the USDA’s projection. Food inflation in India is an ongoing concern according to sources there. India plans to continue releasing grain from their strategic reserves, but food prices rose to 19.2% above the previous year in December. Inflation has been a recurrent problem in recent years and it was reignited in 2009 by the poor monsoon rains. Both China and India are very sensitive to food inflation. They consider it a threat to political stability and the rapid pace of economic expansion. The 2009 grain harvest in Ukraine was down 14% from 2008 due to reduced yields and planted area. This is as expected.
TODAY’S GUIDANCE: Export demand shows no sign of picking up, at least for US wheat. The start of the 2010/11 crop year is just a few months away and generally good conditions for the US winter wheat crop suggest that US ending stocks may not decline from this year’s burdensome levels next year despite the sharp drop in acreage. Fundamental pressure and selling by trend-following funds could push the March contract to a test of 400 or lower this spring and into the harvest. First support is at 481 1/2 to 483 and then at 459. First resistance remains at 514 1/4 and then at 526 3/4.
Wheat Market Commentary – 2010.01.20
by Terry Roggensack on January 20, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
NEAR-TERM MARKET FUNDAMENTALS: The wheat market sold off overnight in conjunction with a stronger dollar. This continued the recent acceleration to the downside by wheat which traders are blaming on a firmer dollar and weak demand for US wheat as well as a softer tone in commodity markets in general. This is a turn around for the wheat market which was the leader to the upside among grain markets during the index funds’ ‘rebalancing’ period at the start of the year and into last week. Now, wheat has become the leader to the down side. One analyst noted that open interest in wheat futures has continued to move higher during the downturn and he suggested that this may be the result of fresh selling by trend-following or managed funds who have been rebuilding their net short position in recent weeks. This week’s export inspections in wheat added to the negative demand picture. They came in well below trade expectations at 9.4 million bushels which was down from over 12 million bushels last week. Total inspections to date stand at 61.9% of the USDA’s projected total for the marketing year versus a 5-year average of 64.2%. Inspections need to average 15.9 million bushels each week to reach the USDA’s projection. Food inflation in India is an ongoing concern according to sources there. India plans to continue releasing grain from their strategic reserves, but food prices rose to 19.2% above the previous year in December. Inflation has been a recurrent problem in recent years and it was reignited in 2009 by the poor monsoon rains. Both China and India are very sensitive to food inflation. They consider it a threat to political stability and the rapid pace of economic expansion. The 2009 grain harvest in Ukraine was down 14% from 2008 due to reduced yields and planted area. This is as expected.
TODAY’S GUIDANCE: Export demand shows no sign of picking up, at least for US wheat. The start of the 2010/11 crop year is just a few months away and generally good conditions for the US winter wheat crop suggest that US ending stocks may not decline from this year’s burdensome levels next year despite the sharp drop in acreage. Fundamental pressure and selling by trend-following funds could push the March contract to a test of 400 or lower this spring and into the harvest. First support is at 481 1/2 to 483 and then at 459. First resistance remains at 514 1/4 and then at 526 3/4.
Tags: Grains, Wheat
About Terry Roggensack