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NEAR-TERM MARKET FUNDAMENTALS: The wheat market followed other commodity and equity markets lower overnight. Traders said that this came on fears that debt repayment problems in Dubai could result in further systemic problems with debt around the world. This took the March wheat contract down to near Tuesday’s lows. However, the losses in wheat were less severe than in other markets such as the S&P and crude oil in the early going. Moderate rains over the north central and NW soft red wheat belt over the past 7-8 days may have caused further delays in the tail end of the planting season. While this is not a severe interruption, it is getting late in the season and some analysts believe that this will help to lock in a drop in acreage of 1.5 to 2.0 million acres versus last year. The USDA will issue its latest Export Sales report this morning. Traders are looking for this week’s sales to be at or above last week’s relatively strong total of 362,400 tonnes. If sales come in as expected, this would again be above the weekly average of 340,400 tonnes needed each week in order to reach the USDA’s export projection for 2009/10. The CFTC will release its Commitments of Traders report on Monday afternoon instead of this afternoon due to the Thanksgiving holiday. Traders will be looking closely at the net short position held by trend-following funds. These large traders were net short by nearly 25,000 contracts on the previous report, but this is down from a record net short position of over 69,000 contracts in early September. The USDA announced a sale of 100,000 tonnes of US hard red winter wheat to Iraq on Wednesday. Egypt’s GASC buying agency also announced on Wednesday that it had bought 300,000 tonnes of wheat. Most of this was from Russia although 60,000 tonnes were bought from France. Once again, no US wheat was included in the Egyptian sale. Traders indicate that the two sales were considered a sign that importers consider current prices attractive and one trader said that the sales may be initial evidence that importers are going to start catching up on purchases which have lagged during the rally in futures over the past two months. The International Grain Council raised their estimate for world production to 668.5 million tonnes, up 1.5 million from their previous forecast but still down from last year’s record at 686.8 million tonnes.
TODAY’S GUIDANCE: Wheat is likely to see further pressure into next week as trend-following funds may start to feel a bit more comfortable with their short position in Chicago wheat futures. Whether this weaker scenario lasts or not will depend on two major factors: 1) investor confidence in the world financial system and 2) whether importers will continue to increase the pace of their buying after a pullback of 50 cents or more. First support in the March wheat contract remains near 547 to 548 with next support near 535 to 540. First resistance is at 567 1/2 with the next resistance at 574 1/2.
TODAY’S MARKET IDEAS: Traders can remain short March wheat with an objective still at 545. However, the increased financial worries this morning could push the March contract down to the 100-day moving average or lower over the next 1-2 weeks. That average stands near 530 this morning.
